It's 6:15 pm, and I am sitting on a hard, black wooden bench in the basement of a major department store, staring at a lemon cream colored wall, the fluorescent lights flickering overhead. I just left work an hour ago, still in my suit, make-up touched up in the mirror of the rather-nice public bathroom of the department store, and now, as I'm sitting here, I look down and realize I'm wearing my car shoes -- a pair of black Nine West flip flops -- and my interview shoes are tucked in the draw of my desk back at he office.
Damn it. But, as another minute ticks buy, I realize I probably have enough time to go upstairs to women's shoes, try on, and buy a pair of plain black pumps. After all, my interview was supposed to be at 6:00 PM; I've been sitting here since 5:45 pm, and half an hour later, have yet to even see a manager, let alone Diane, the woman who was supposed to interview me. The woman who, I was told at 5:45, was on dinner break, yet later turned out to have left for the night at 5 PM, even though my interview is scheduled for six.
The clock ticks by.
This interview is a joke, I began to think. The person who was supposed to interview me left for the day before I arrived--which is somehow my fault for using the online interview scheduling utility, if the frustrated mumblings of the HR ladies are to be believed.
Great way to make a first impression on me, the perspective employee.
Job interviewing is like dating--both people in the interview are trying to determine whether or not to enter a relationship with one another. And like dating, the relationship can't be a one-way pursuit with one person desperately trying to impress and the other indifferently detached. If the attraction isn't mutual and the relationship mutually beneficial,why enter into that arrangement?
Sure, like in the dating world, there are people who will jump into bed with the first partner that expresses an attraction to them; those relationships are rarely beneficial beyond a short period of time. There are also those who'll take and keep a completely shitty job just because it's a pay check and they're in a recession. It is this very type of person that will put up with the situation I face now -- watching a plastic clock, the sort they sell at Target for $5, tick away minutes and hours of their lives while being blamed for a clerical mistake on the part of management, HR, or someone within the company.
Just as I stood to leave, a manager rounded the corner.
"You must be Elizabeth," she said, shaking my hand weakly. "I'm Jane, the shoe department manager."
I was there to interview for a second job in cosmetics, because I used to work in cosmetics, because make-up is fun and I could use the discount, since I'm already dropping my main paycheck there anyway. With involuntary furloughs coming soon, I need to keep my cashflow level, not let it dip. This job is to prevent that dip. I'm not a desperate job seeker who'll take shoes instead of make-up because any job is better than know job.
Jane seemed to realize this.
"I'm going to do your first interview; if you still want to work in cosmetics, you'll have to come back to reinterview with Diane."
I made an appointment for a second interview and left around 7 PM. My new interview is tomorrow at 6:30 PM. Hopefully Diane will be there this time.
On March 6th, I called Orchard Bank (a division of HSBC) to lower the APR on my Master Card from 26.9% to 10.9%, the rate of my Orchard Bank Visa. As a short summary of my previous post about this, I called at 1:08 PM and spoke with Rachel, who informed me that she couldn't lower my rate and that the ridiculously high rate must be my fault. For twenty minutes, I argued with her that no, I hadn't missed a payment on any account, no I didn't go over the limit on any account. Finally, I just asked to speak to her manager. I was put on the phone with Pat, a Rachel's superior, who explained that she couldn't lower my rate either. However, I have another account with them (a VISA which is an older account), and Pat suggested I consolidate the two accounts. I specifically asked what that meant. Pat explained that a consolidation would:
1. Transfer the balance from the high APR card to the VISA (which has an 10.9% APR) and close the Master Card account
2. Transfer the credit limit of the high APR card to the VISA so that I wouldn't lower my total available credit and take a FICO score hit.
3. Keep the VISA's terms and conditions -- including 2% cash back -- intact.
I verified this information with Pat three times, explaining that I currently didn't have a credit limit high enough on the VISA to absorb the total on the Master Card. She assured me each time I asked that I'd transfer both the balance and credit limit, only after she said that they wouldn't consolidate the cards if the limit wasn't high enough to cover the new balance did I agree to do the consolidation. By switching cards, I would save $99 over the course of the year due to the lower interest rate and lower annual fee.
Three weeks later, I received the paperwork in the mail to authorize the consolidation. I filled those out and mailed them back the next day. I continued to make my payments as usual.
Today, I got a notice from Mint.com that my VISA card was over the limit by a few hundred dollars. Scared that someone had my credit card details, I logged into the account to find that the balance transfer had taken place, but not the credit limit transfer. My APR was now at the default rate and I had a $30 penalty! I logged into the Master Card account and discovered that the account was closed.
Assuming it was a mistake, I called Orchard Bank immediately (4/24/09 @ 6:20 PM) and spoke with Jade, a customer service agent at an outsourced call center, who really couldn't be bothered. She explained that the terms and conditions MUST have been clearly explained to me (they weren't). I asked her to raise my credit limit, and she did, but not enough to cover the balance transfer. She also, after I asked, waived the $30 fee, but couldn't help with the APR default. Once again, I asked to speak to a manager.
At 6:29, I was put through to Karen who once again didn't believe that Pat would have made that promise. She seemed more than happy to just tell me the same things Jade had just said -- until I mentioned that I was ready to close the account, because my FICO score had already taken a massive hit with the closing of the account and the overdraft. An informed consumer caused her to "look further" into my account. She stated that the consolidation shouldn't have been completed if they couldn't increase my limit to cover both amounts. However, she still seemed unable to help me until I mentioned that I used to work at BarclayCard, a division of Barclay's bank, as a CAM myself, and I knew there was always something you could do for an account holder such as myself who's never been late or missed a payment, who always pays more than the minimum but never pays the balance in full -- thereby always paying interest and annual fees without complaint. Essentially, I MAKE THEM MONEY, and I know from experience that there are overrides for customers such as myself who are way more valuable than the customer who only pays the minimum and is a high risk and extremely more valuable than the customer who pays his or her bill in full every month. "Computer says no" is not a valid response to a customer like me, and if HSBC believes it is a valid response, then I'll take my money elsewhere.
Suddenly, she was scrambling to find someone to "fix" their mistake, but as it was not 6:35 PM on a Friday evening, she couldn't find anyone. She took my details and promise a personal phone call from herself and her manager no later than Monday night.
Later that night, I got a text message from Mint.com that a $217 minimum payment was due within a week on my Visa card. "Well, that's just silly," I thought. "I have my paper statement right here that says I have a minimum payment of $15 due by 5/1/09 on that card, I've already paid $50 on it this week, and I'm only over my limit right now by $117."
Still, since HSBC has fucked me in the ass pretty badly in the last twenty-four hours, I decided to go check it out online. Sure enough, even though my paper statement says my minimum payment for this month (due by 5/1) is $15, the online account jacked up my minimum payment to $217 due by 5/1/09. That's a week away. If I didn't have online bill pay access and just paid based on the paper statement, I'd have paid $50 when I first received the bill and be sitting here, confident that my bill was paid by more than the minimum while a ticking time bomb sat on the account. Come 5/7 (average date that I receive the bill) not only would there be the balance transfer, the low limit, the higher APR, and the $30 penalty, but there'd additionally be a $30 late payment fee because they increased my minimum payment after billing me.
Then, to add insult to injury, I received another alert that a $30 credit had been applied to my account, this alert from Orchard Bank itself "That's funny," I thought to myself, "I don't see a credit on the account." Then I looked at the card number on the alert.
They applied the credit to the closed and paid in full account.
I have no idea how my situation will resolve -- if it will be resolved at all. I've been promised a return call from Karen and her boss by Monday, at which point I'll raise these new, fun problems with her as well as the original issue. I have, in the interest of the old axiom of CYA (cover your ass) moved $250 from my emergency fund to my checking account. As soon as the money clears (Tuesday, 4/27) I'm going to make the full minimum payment, regardless of the outcome of the call with Karen and her boss. After that, with an intensity that Dave Ramsey himself would probably find terrifying, I'm going to pay off this credit card, pay off the car, and then tell HSBC where to go and how to get there in no uncertain terms.
And just you wait, HSBC. In addition to notifying the Consumerist about this, just wait until I'm debt free. When I call Dave Ramsey for MY debt free scream, just wait until you hear the major bashing you get on the air that day. Just you wait.
But that's neither here nor there. The important thing is my epic fail -- and while it's not the most money I've ever lost, percentage-wise, it's the largest mark-up on a small mistake.
So my epic money fail:
Once a week, give or take a day, my office orders chinese food and someone goes to pick it up. Last week, it was my turn. Or, more accurately, I jumped to volunteer because I needed to hit the ATM anyway to get cash to pay for my meal.
During money collection, a co-worker asked me to spot her the cost of her meal, and I agreed. I was going to get $20 out of the ATM. What was a few more bucks out of that $20?
On my way out the door, I mentioned it might take a few extra minutes for me to get back with lunch, since I had to hit up an ATM. Helpfully, a co-worker mentioned "They take credit and debit cards."
Bingo!
I just opened a new bank account that included a debit card which, when used as a credit card, gives me cash back. Instead of hitting the ATM, I could cover my co-worker and my lunch with the debit card, getting cash back for the purchase. Hell, a $20 purchase with 2% cash back = 40 cents. And that meant that if I put the entire amount of my entire office's purchase on my debit card ($90) I'd get $1.80. It'd pay for the gas plus a little more.
So, when said co-worker said she'd go to the ATM so I didn't have to spot her -- she'd even help me pick up the lunch -- I politely declined.
"Don't worry," I said. "I got it."
Stupid girl.
A Chinese lunch for 9 is rather awkward for one tiny girl to carry -- especially two blocks from the parking lot to the building. So, I did what any smart person would do. I used the temporary parking spot outside the office. You know, the two hour parking.
I think the rest writes itself.
I forgot to move the car. I got a parking ticket. For $25.
$25 to make $1.80
I'm a genius, and I'm paying quite the mark-up on my stupidity. Call it my stupid tax.
You are 19 years old, and it's January 20-something -- i.e. the first day of classes in the spring semester of your sophomore year of college. You're sitting in some class or other that's part of your major, which (generally) means you're interested in learning about it. Which of the following is true?
A. You bought the textbook, and you're excited to be there, ready to learn something new.
B. You already have a fair grasp of the concepts underlying the class' topic because you've read books (other than the textbook) already, but you're hoping the class will hone your skills and expand your knowledge so you'll feel truly confident when you're not being a know-it-all like your mother always said you were. (But then again, what did she know?)
C. You have the textbook and have already skimmed and outlined the first chapter (if not the entire book) and you can't wait to fill in your outline with lecture notes and tidbits you glean from a more thorough reading of the text.
D. Because this is your major, you know a bit about it from other classes, but you're mostly a blank slate. Yes, you bought the textbook.
E. You're here because it's a required class, and you'll get the textbook when it becomes obvious you won't pass without it -- somewhere around the week before the midterm.
If you answered A or D -- then you'd have no problem not only buying I Will Teach You To Be Rich but reading it and following along with the review format I chose before I received the first chapter. You can read along, week by week, and at the end of each week, you'll do the little assignments, get at least a B (which is to say, get set up with the bare minimum) and be happy with things. If you answered E -- with rare exception covered later, buy the damn book already; it was written for YOU.
If you answered C, you shouldn't have too hard of a time with the book, though the weekly format will progress too slowly for you. If Ramit says it takes half an hour, I finished it in 15 minutes, and you'll find that you're not really working too much on this personal finance stuff. Of course, the general conceit of the book is that we're all lazy slobs (hey, it's mostly true for most of the population) and won't want to devote a large block of time daily to this stuff. But, if we have three or four assignments that will take an hour or two each, we can probably do them over the course of 7 days.
If you answered B, you're fucked, because this is not the $1000 in 30 days challenge. If you have an automated system in place, if you've done most of the ground work with setting up bank accounts, paying your credit card on time every month, and take advantage of your 401(k), here's how this book is going to read for you: "Hey, hey! You're okay! The market's down, but on-ly to-day!" or "We are saving! We, we are saving!" So much of I Will Teach You To Be Rich is spent explaining and justifying and rationalizing with you -- because it's assumed you're fresh out of college, wet behind the ears, and clueless -- that you're going to want to skim the book after chapter two.
That's the biggest problem with I Will Teach You To Be Rich. Ramit assumes two things about his audience: we're young and inexperienced and we're going to be defiant young adults who want clear, well-argued explanations in clear but clever and hip language. The latter is entertaining at times -- imagining Ramit throwing people against the wall and screaming about Dollar-Cost Averaging is incredibly commical to me -- and can help explain things like Asset Allocation in no-bullshit terms that make it easy to understand without re-reading. The former, though, comes across to me -- some who's done a bit of reading on the subject -- as justifying his assignments for you. You should open a high-yield savings account. Here's three pages -- one reason per page -- on why you should do what I said. Ramit, I bought your book, which is published by a real, honest-to-god publisher. You have automatic authority. It's not like in Uni, where you have to justify every thesis with 5-8 double-spaced, 12 pt. font, 1" margin pages in APA format. I believe you! Tell me what to do, and I will do it!
Sadly, most of the book wasn't involved in being bossy and telling me, "Bitch, you need to do this to fix that 600 credit score" -- it was 'You should pay you bills on time. Here's how we automate your bill paying, and here's why you should do what I just suggested you should do."
I was looking for get your finances in gear boot camp; I got personal finance 101.
So what's a girl or guy to do if you're that B-answering over-achiever? What if, like me, you're in your mid-twenties with two degrees, a husband, and a brand new car you love and paid a great price for? What if you also started out as the E-answering slacker who fucked up her credit so much in the 1990s that you can't get that great loan price and credit card companies don't want to even look at you unless you pay an annual fee?
Then what?
I want to say that if you're a B Answer person, go over to I Will Teach You To Be Rich.com and check out the $1000 in 30 days challenge and save yourself $13. If you're already invested in your work's non-matching 401(k) or 403(b) -- and if you know the difference -- all Ramit's going to do is tell you how you should stop that plan until you've maxed out your Roth IRA. He's going to tell you that you need good credit, and to do that you need to pay your bill on time, in full every month. If you have bad credit, he's going to tell you to get out of debt. No magic formulas or quick fixes here.
So I want to say don't buy. But I can't.
Why? The script to negotiate down your credit card interest rate saved me $99 on it's own. Perhaps if I hadn't been such an over achiever and opened up a new bank account, I'd have waited and had assignments for chapter two. If I wasn't such a hands on, must touch everything person, I'd follow the chapter three suggestion and stop contributing to my 403(b) (note: if you know what a 403(b) is, you already know too much for chapter three) and open a Roth IRA to max out. If I hadn't already automated my money, chapter four would be excellent as well.
In other words, even though my overachieving ass has already followed 99% of Ramit's suggestions, there was one that covered more than ten-times the cost of the book. (I got it at a pre-order price of $8.95).
I also learned about asset allocation and investing in lifecycle funds. I'm actually already doing both of these, but now I know exactly what I'm doing and why it's good that I'm doing it. So in that respect, the book made me a wiser consumer, and I don't know how much of a price tag I'd put on that.
But, if you're the kind of person that's been reading Dave Ramsey, David Bach, and the various financial blogs out there, you probably already have 99% of the knowledge in your head. The only thing you need to figure out is whether or not the scripts to help you do that 1% worth of work will make it worth the investment of time and money. I believe it was for me, but just like choosing an index fund over a lifecycle fund, the decision is ultimately yours based on your comfort with risk and spending. I really thought I'd save more money with this book than I have -- I saved more during the $1000 in 30 Days challenege last november -- but I learned something I didn't know as well, which makes the book personally worthwhile for me.
The next chapter in Ramit Sethi's book, I Will Teach You To Be Rich, is on setting up your bank accounts; ironically, I read this chapter while sitting in the lobby of the new branch of Chase Bank three blocks from my apartment as I waited for my account manager to come back with a deposit receipt and hearty, congratulatory handshake.
"Well fuck," I thought as I read the excited way Ramit spoke of his online, high-interest checking account with Schwab. "I should have talked to Chuck."
But then again, there's never that much money in my checking account to earn interest on in the first place. My Sovereign Bank interesting-bearing checking account usually returns pennies, and they have one of the more competitive interest rates for brick and morter banks.
The basic premise of chapter two of I Will Teach You To Be Rich is that you need to set up bank accounts that will work for you and do everything you need to do, which was one of the reasons I was abandoning my Sovereign Bank account at that very moment. Later chapters of IWTYTBR go over account automation -- making your accounts work together to manage your finances 24/7, so you make money and pay bills while you sleep, eat, work, and play without ever thinking about it.
Automation is a favorite tool of most modern financial gurus, from David Bach to Suze Ormond. In fact, of all the books on personal finance I've read, only Dave Ramsey's lacks the religious fervor for automatic money management. Having read many of these, I was in the process of finally doing just that -- automating my finances -- when I read Ramit add his voice to the chorus, though this is covered more indepth in chapter five. For right now, Ramit wants you to find a bank account that doesn't charge fees, does pay interest, and is an account you'll love and open an account there. He also wants you to open an online, high-yield savings account (though I did that two years ago with ING.)
That's pretty much it for Chapter Two. It's basically a primer for the college graduate who somehow made it through school without a checking or savings account, or for the graduate or young professional who's been with the same bank since their mom and dad opened a savings account into which they could force them to put their birthday money from grandma. If, like me, you did a bit of independent living before, during, or since college and you have a checking and savings account set up that you love, this is a skimmer. There's info on the above-mentioned Schwab account that I think anyone with half a brain would automatically sign up for if they have a bank they're not enamoured with.
Now me, personally, I'm the kinda girl who likes to work ahead in the book in school, who's annoyingly read several alternative texts on whatever subject she's studying and tries to synthesize the information into a complete whole for digestion and application. Money management is no different. Currently, I have a separate bank account for each type of funding I'm going to do, which (as you will see) helped me out a lot in setting up a budget in Chapter Four and getting my automation on in Chapter Five. But, in the interest of covering chapter two, here's what I have set up:
Chase Checking Account:
Free if I have direct deposit or make 5 check card purchases per month. 4 points for each dollar I spend on my rewards card ($25 annual fee). Online bill pay is also a big plus for me.
Sovereign Bank:
Interest bearing checking. No fee, no frills.
Credit Union savings account:
Crappy interest rate, but membership has benefits when it comes to loans and mortgages.
ING Direct savings:
High interest rate, good customer service, 3 day wait for funds to be released means it's ideal for saving and goal setting.
Much like one of those novels that's broken up into character-driven stories that will eventually intertwine where one character is particularly engrossing, I'm very tempted to jump ahead to the end at this stage in the game. Ramit says that you should tackle each chapter in one week -- take a week to get your credit report and score; negotiate your credit card interest rates, fees, and limit; etc -- but when you've been trying to tame your debt for as long as I have, you've got a few of these things under your belt. Today, for shits, giggles, and the ability to say I did it, I went to both bankrate.com and creditkarma.com to get a rough (and free!) estimate of what my credit score is. Well, it's about 600 -- right where I'd thought it'd be based on the last time I pulled my credit report. So yes, my credit still sucks, which means SO much of Chapter One is still not applicable to me. And Chapter Two I already had set up, especially because I read Ramit's blog. So I've already started reading Chapter Three, though that chapter is a review I'll save for another day. But hopefully, there's more meat later in the book, because two chapter's in, I still feel like the AP Honors student sitting in Algebra after taking pre-calc -- can we just get over the fundamentals and get into the application already?
Can you tell I've been like that all my life?
Look, it's no secret that I'm fascinated by financial blogger Ramit Sethi--his brand of personal finance is something that, from his blog, twitter, and newsletter (all of which I follow), really works for me in that like diets that have worked in the past, they don't require the strict, dogmatic devotion and monk-like existence of Dave Ramsey. His $1000 in a month didn't really save me $1000 (but then again, I only make $2k a month and I spend 947.50 each month on rent and my car payment alone) but that's okay. His ideas still saved me a buttload in November, and I'd probably have saved $1000 if I had more will power.
Then, the book arrived on my doorstep, in full, Tuesday, and I stopped following the steps and began reading. Now, I'm so anxious to jump to the end of the steps and be rich, I'm not following the prescribed method for getting there. It's kind of like reading the recipe for a cake, then wanting to eat the cake and being loathe to going back to the beginning to sift the flour and go through the tedious steps of making and baking the cake.
Still, in the spirit of the book, I will review each chapter individually, as it's own step.
The biggest problem I've found with Ramit's book is that, like his Scrooge Strategy newsletter and blog, I Will Teach You To Be Rich assumes a few things about it's readers. First, we are all in our early twenties (I'm actually 28, but that's a small difference). Second, we're all just starting out in finance.
This second sticking point was my problem with chapter one. He assumes that we don't know what he's talking about, that he has to not only explain credit scores and debt (which is always good to have explained as a refresher) but that he has to sell you on the idea that he's right about these things. I suppose it's the kind of hang-up one gets from being a blogger turned author; on the internet you have to sell your authority, but in a published book, authority is kind of assumed. (That's why people believe the slew of fake memoires as readily as they did; publication lends itself to authoritativeness, of veracity.) Step one of the first week of Ramit's six week plan is to spend an hour pulling your credit report and checking it. Sadly, I already did that, about nine months ago when I was going through the interview process for a job in financial planning (which didn't pan out) and cannot do step one again for another three months.
So, I moved on to the next step: asking for a reduction in APR.
This is one of the items that MORE than makes up for the cost of the book, if you can swing it. Ramit suggests that you should have a credit card with a low APR (he doesn't really define low, though) and no annual fee unless it's a rewards car. Nice suggestion, but for those of us who fucked up our credit at the tender age of 18 (remind me to tell you my Capital One umbrella story sometime) a fee-free card just isn't in the cards for us. We're going to have to pay -- or deal with a secure card -- to even have credit.
The benefit of the book is that Ramit doesn't just tell you "Get a lower APR and have no annual fee unless you're getting rewards! And cash back isn't a reward!" He tells you how to get just that by providing handy little scripts in the book itself. Want a limit increase? There's a script for that. Now, just like the call center worker on the other end of the line, you have your next sentence in front of you, in black and white, and you're prepared.
If you haven't already fucked up your credit, of course.
Buoyed by Ramit's urging that it wouldn't cost that much of my time and would be greatly beneficial, I called my credit card company. I have two cards with HSBC -- Visa and Master Card -- that have two very different fees and interest rates. One has a respectable 12.9% APR with a $49/year fee (and 2% cash back -- in the last twelve months, I've almost earned back my annual fee); the other has a 26.9% APR and $79/year fee.
Clearly, something had to give. Unfortunately, the higher card was the older one, the first credit any bank would give me after the Capital One fiasco.
Script in hand, I called HSBC.
Ramit's book also includes a handy pocket guide for calling and talking to credit card companies, so you'll know to whom you spoke and when. My call was answered today at 1:08 PM EST by Rachel. She asked how she could help me, and following the script, I requested a decrease in my APR% and to wave my annual fee.
Like the book said I would be, I was immediately shot down. Luckily, there's a script for that.
Once again, as the good book said, she checked my account. But unlike the book's happy ending, I was again denied.
"I'm sorry, but we don't have any offers available to extend to you at this time."
Now, you probably think I should have given up, said thank you, and moved on. But look, this book cost $11. The difference between paying my credit card off in the next 4 months at 26.9% and 12.9% is $5 per month, or $20 total. That more than pays for the book itself, not to mention getting rid of that annual fee.
So I pressed again by repeating the last lines the script ended with.
She looked at my account. There were no offers. There was also no more script. From here, I was going to have to wing it.
Rachel told me that I should call back in six months, that they re-evaluate offers semi-annually, and maybe in October there'd be something available. I asked why, in the nearly three years since I took out the card, I'd never once had my rate reduced. She explained that anything in my credit history -- inside or outside of HSBC -- would effect my rate and offers extended.
This is where being on top of your finances -- something Ramit doesn't cover in chapter one -- can really help in negotiations like this. I was prepared. I pointed out that since I received the card, not one account that I hold has been delinquent; since receiving the card, HSBC has extended me another credit card and a car loan, both with APRs half of what this card was. I had never overdrawn the account nor missed a payment.
"Maybe you just forgot a payment."
"First, I would have noticed the fee, since I check my statement every month. Second, it's impossible, as I pay bi-weekly so that I make thirteen payments per year instead of twelve."
Now, Rachel had run out of script. Again she repeated how APR is determined. Again, I refuted her points. I asked if she could open a new account for me and transfer my old balance to the new account, then close out the old one. She again said she couldn't.
Now, I know my credit is messed up, but I have enough debt to HSBC with enough of a credit history with the company to deserve better than this.
Twenty minutes and three times on hold later, I grew tired of her talking around me. I simply stated, "So there's nothing you can do for me today?"
"No."
"So you're saying that I should close the account and get another card?"
"What?"
"Well, you're saying that you cannot help me. You're saying no one can do anything for me. You're saying that a customer of three years, who therefore should have had six opportunities for a lower APR, and who always pays on time, always pays more than the minimum and usually pays in full, isn't a worthwhile customer. You're saying that your company cannot provide me the service I need; why should I, therefore, continue to do business with a business that doesn't meet my needs."
Pregnant pause.
"I guess you could do the research and find a different card that meets your needs elsewhere."
Damn, Rachel. You suck at this.
Finally, I said, "So you can't help me at all?"
"No."
"Can I speak to your supervisor, then?"
She must have been so happy to finally dump my call.
At 1:35 PM, Customer Account Manager Pat picked up the phone. Resorting to the script again, I began at the beginning and explained the situation to her. She tried to tell me that, unlike Rachel who "for your security" couldn't see more than a few months in the past, she could see that my rate increased in April of 2007 (almost two years ago). Maybe I should have called about it then?
Too bad that, until I moved into more expensive digs recently, I always paid my bill in full and didn't care about APR.
I explained the situation. Pat pulled up all of my HSBC accounts and saw the discrepency (There's an account opened in October of 2006 has an increase in APR in April of 2007. I then open a new account a month later and receive an APR that's more than half off the new rate?) She then said, like Rachel, she couldn't lower it. I threatened to leave, again. Pat seemed geniuinely unhappy to see me go -- possibly because she could see all the business I give HSBC or possibly because she's a good CAM, and suggested consolidating my credit cards. I'd have the limits joined into one high limit on one card, with the 12.9% APR and $49 per year fee, as well as the cash back. In total, with the pay off date and the lack of second annual fee, I'd save $99 this year just by illiminating one card and consolidating it all onto the other.
Three times I verified that the Visa (with the 12.9% APR) would be kept open, that I'd retain the lower annual fee, lower interest rate, and the 2% cash back reward. Three times I verified it wouldn't change the terms and conditions of my card. Then, after I was satisfied that we were straight with what was about to go down, I let her put the application in.
The total time I was on the phone? 35 minutes. In 35 minutes, spured by Ramit's suggestion, I saved $99.
If the rest of the book proves to be this useful, I may save $1000 in one month yet.
A while back, I wrote a rather lengthy post where I slammed a women I ran into in the drug store for spending way too much for groceries by shopping in the drugstore, taking advantage of in-store coupons and rebates that, in reality, left her paying more than she would have if she went to the Wegman's up the street.
I pondered this a few weeks ago, as I stood in that very same drug store, not filling a prescription, but buying over the counter medication.
If you're following me on my fitness blog, you know that I've been working hard to lose weight as one of my 101 goals in 1001 days that began on January 1st. (Running a successful personal blog about finances is another.) One of my allies in my own personal battle of the bulge (how cliche!) is Alli, an Over the Counter (OTC) drug that helps you lose weight by blocking fat from being absorbed. There are some nasty side effects if you eat too much fat, which I won't go into on this blog for those of you who have weak stomachs, but for those who stick to a low fat (1500 calories per day; 15 grams of fat per meal) diet, it can help you lose an extra few pounds each month.
The problem is, as the first FDA approved OTC weight loss pill, the drug is quite expensive. The average price across five different stores (2 drug stores, 2 grocery stores, and one large retailer*):
60 pills: $47.09 (78 cents per pill)
90 pills: $55.79 (62 cents per pill)
120 pills: $67.27 (or 56 cents per pill)
With the exception of one grocery store which went much lower than the average, and the large retailer which (surprisingly) far exceeded the average, the price structure set by the makers of Alli, GlaxoSmithKlein, seems to be intact and follow the general rule of buying in bulk: the more you buy, the more you save. Costco, for example, had the pills even cheaper--$65.99 for 150 pills, or 44 cents per pill--which one would expect from the "the more you buy, the more you save" model we're all familiar with.
So, if the grocery store was the cheapest, without having to buy a membership, why was I in Rite Aid buying Alli?
Rite Aid charged what seems to be the MSRP for the pills, base price of $49.99 and going up $10 for every 30 pills. The pack of 90 pills in my hand, therefore, was priced at $59.99, five dollars above the average--except that it was "on sale" (in the way that many stores have perpetual sales on certain items) for $49.99, putting it below the MSRP and the average price of the item.
Of course, those of you with a calculator handy are clearly ready to chide me. "Uhh, wait!" you say, "if you'd bought the 120 count pack, even at MSRP of $69.99, you'd pay 58 cents per pill. At $49.99 for 90, you're paying--"
And that's when you'd stop, because the calculator would have brought up the magic number: 55 cents per pill, three cents per day saved against the average price of the larger pack.
But, of course, some stores charge below the average price. (And if I've calculated the average, I know which they are.) Why didn't I just go somewhere and get the 120 count pack for less than 55 cents per pill? Because Rite Aid tends to have Alli as a "Single Check Rebate" item.
Single Check Rebate (SCR) is a Rite Aid concept that seems fairly simple -- so simple that I'm surprised they're the first to do it in New Jersey. Instead of you, the consumer, buying certain items, filling out the rebate forms, and tracking several rebates through several companies, Rite Aid does all the leg-work for you. You buy your favorite products from Rite Aid and enter your receipt information (date, store number, transaction number) into a handy online form. If there's a rebate for the item, Rite Aid applies for it for you and credits that amount into your account. At the end of the month, you get one check with all your rebate cash.
Alli is a perpetual SCR because GSK is so desperate to get the population hooked on the drug, they discount it themselves, through rebates and online coupons. Rite Aid simply makes it easier to apply the rebate by buying it through them.
So I was currently buying the pills for less than the cost of the large package. And when my $10 rebate check was deposited back into my account, I actually got the pills for MUCH less. In the end, after rebate, my pills cost $39.99, or 44 cents per pill--the same per pill cost as Costco, but without having to pay for membership.
Score!
This morning, in the hallway at my office, I stumbled into a conversation between two of my coworkers. Bekki was recalling a particular disagreement with her husband the night before over a debt restructuring plan. Due to layoffs (two in the past three years) Bekki and her husband were paying $450 a month in a repayment plan through a restructuring, consolidation plan. (I didn't get too nosy and ask who they restructured through. That would have just been rude.)
The disagreeement boiled down to a $50 per month "payment insurance" fee -- much like the $10/month fee my credit card company always asks me to take out whenever I call to get my current balance, make a payment, or otherwise contact a live person. Her husband, who works in the world of finance and has a business degree, believes the company is ripping them off. Bekki, however, likes the security of the insurance fee -- which means that no payment would be due if her or her husband were once again laid off.
Our coworker agreed with Bekki. "It's not about the cost. It's about how it makes you feel. If you feel safer knowing that if the worst should happen, you won't have to pay for that debt, then that's what's important to you. You can't put a price on security."
This observation is wrong for several reasons. First and foremost, payment insurance is a myth; all any company's payment insurance does is not require you to make a payment that month. They don't "make the payment for you" or "waive the payment" as they may claim. They just don't hold it against you -- they don't charge a late fee or make you pay double the following month as a minimum. That amount is still a part of the whole, and you're still paying interest on it. It doesn't magically go away -- it just allows you to ignore it, guilt free and fee-free, while the interest racks up.
A smarter plan is to create an emergency fund that will cover your living expenses for three to six months. (Suze Orman and others recommend 6-8 months, but honestly, I don't think I'd be able to come up with that much any time soon.) You can even sub-divide the fund into individual expenses in an account like ING Direct, which allows you to build subaccounts. You can even have some of those sub-accounts jointly held. For example, my ING Direct account is divided into several sub-accounts: gas hedge fund, emergency fund, car insurance fund, verizon payment, and prudential insurance payment. Those that my husband and I share the benefit of -- the car insurance and verizon payment -- are joint subaccounts. David can contribute and withdraw from them at any time. But my account as a whole is mine; he only has access to those subaccounts.
If I was Bekki, instead of paying some company $50 per month (good bye fee!) to increase the interest I'll pay them if my husband or I are laid off, I'd put that $50 into a high-yield savings account such as ING Direct. Why? Well, when I pay the company $50, that money is gone forever, but the interest increases, so really I'm just wasting money. But, if I put that $50 into a high-yield, online savings account like ING, the magic of compound interest will leave me $100 richer at the end of 12 months. At $50/month, I'll have $600 by the end of one year. However, with .025% interest paid to me each month (or 3% annually) I'll have $609.84 at the end of twelve months.
Ten dollars may seem like a small sum to care about, but remember, it's not $10 more that you have. It's $610 more that you have. Remember, when you pay the "payment insurance", you're losing the whole lot.
Additionally, because I'll maintain my payments and not defer them during the lay off, I'll save on the interest that would otherwise be accruing on the unpaid balance (which, trust me, is more than 3% APR).
Another example is the car insurance account mentioned above. Instead of paying the $5 per month fee to pay my car insurance on a monthly basis, I pay semi-annually, socking the semi-annual fee (divided by 6) into a high-yield savings account each month. For two drivers (one a new, male driver) our semi-annual premium is $847.40. Divided by six, that's $141.25 per month.
If we paid on a monthly plan, we'd be paying $146.25 per month. Keep that in mind.
Instead of paying the five dollars extra, my husband and I each contribute $74 per month ($148/month total) into our car insurance fund, which gets about 2.5% APR right now. When the payment is due in six months my husband and I will have $894.24 available to pay the bill. The extra can be redistributed into our emergency fund or continue to sit in the subaccount, accruing interest, for the next payment. Meanwhile, by paying semi-annually instead of monthly, we don't just save the $30 in fees. We save $46.85 -- $93.68 saved for the year.
But who needs an extra hundred bucks...or six?
After the dissection yesterday of the basic arguments in the disagreement between two financial advice bloggers over Big Gets vs. Little Wins, I felt I should write about my own little win that turned into a big get for me, and some of the lessons learned.
January 2009 was David and my first full month in this apartment; having never lived on our own as a couple, we were still -- we thought -- prepared for the bills associated with independent living. We made sure to get package deals, which we haggled over (to make sure our Verizon triple play would only be $94 a month, for example) and kept our thermostat at a reasonable 68 degrees.
Naturally, we were quite shocked when we received that first full month's bill -- $198.
Luckily, we'd been budgeting $100 each per month toward our bill, so we had just enough to cover it. However, we'd hoped to have a little left each month, to sit in the account and keep it on the northern side of zero. We were going to have to make some cuts -- gas alone was running us $130 per month for our tiny apartment. How were we going to manage that when our bill was going to be about $200 per month?
After scouring the internet for suggestions, David and I implemented a few of simple changes immediately upon receipt of the bill. First, every morning, I leave the house before David -- and I return after he does at night. Because I'm the one who's always freezing cold, whenever I'm in the house, we keep the thermostat just a hair under 69 degrees. But as soon as I'm out the door, David knocks that thermostat down to 65 degrees, where it remains until he arrives home and cranks it back up to the temperature I enjoy. To keep what hot air we have inside the apartment, we rolled up a thick towel and placed it on the floor by the door, wedging into the noticeable gap between the door and floor. We also cut down on heat loss by cutting out use of the fan over the oven, which apparently can suck the heat out of an entire room in less than 60 minutes.
The other suggestion we've implemented immediately is to use very little hot water, which is also gas heated. Most websites advocate washing all clothes in cold water, which we immediately started doing. This is wrong. I can't vouch for most women, but when I put on a fresh pair of panties, I want them to smell clean, not just be clean. Same goes for socks. However, while cold water and detergent may get rid of the residue in underwear, especially in women's panties, there's a certain smell that will simply linger if it isn't destroyed by hot, sudsy water. As such, I compromised on the super-frugal suggestion of cold water only: I do a load of socks, underwear, and towels in hot water. Everything else gets the cold shoulder, and honestly, after that little change, I don't notice a difference in my laundry.
I do, however, notice a difference in my utility bill. Less than a month after the change was instituted (we get our bill, typically, seven to ten days after a meter reading) our bill was down to $173, a savings of $25. Now, this of course isn't the best we can do, nor the lovely number we received when we first moved in ($135 for our first 20 days) but it is a lower consumption, and proof that with a few more changes, we may be able to get a substantial win from little gets. But right now, with many other areas of our life in need of improvement, these gets are going to have to do.
It began, simply enough, as a question from Trent of The Simple Dollar's weekly reader mail post. Another blogger, the much adored (by me) Ramit Sethi of I Will Teach You To Be Rich, had begun a paid subscription service called The Scrooge Strategy which would offer weekly tips designed to save large sums of money with little effort. Drawing off the success of the $1000 in 30 days challenge, from which I've gleened several tips myself that I've put to use in this blog, Sethi decided to expand to larger sums over larger periods of time.
With each Scrooge tip — sent out weekly — I include tons of resources and details that I painstakingly research. Instead of saying, “Create a plan!” I include a spreadsheet with already filled-in data to get you started. Instead of telling you how I saved money traveling to Vegas, I show you the screenshots of the sites I used, including where to get coupon codes and a call script of exactly what to say when you call the hotel. Each tip is full of tactics to save you money, earn you money, and optimize your existing spending.
In other words, it's a bit like Personal Finance for the Fundamentally Lazy. People who need a script to read when negotiating the terms of the credit cards or their salary. People who need a series of small shocks delivered rectally whenever they reach for the phone to order a pizza instead of eating in because damn it, they just can't be bothered to cook. People like me.
Trent wasn't too fond of these big, drastic changes from small investments of time.
I think it’s good in concept and attractive for people looking for the big quick fix, but it’s shortsighted.Let me give you an example. Let’s say I can swap out the incandescent bulbs in my house for CFLs and drop my electric bill about $8 a month. This activity would take me about twenty minutes, just once. Under the philosophy you describe, such an activity would be a waste of time. Yet, over the course of three years, that activity saves $288 for only 20 minutes worth of effort (actually less than that, since with CFLs you don’t have to change bulbs nearly as often).
So Trent's argument against the Scrooge Strategy was that it was "shortsighted" because it only focused on the big get, the quick fixes to those of us with massive holes in our budgets that are leaking cash. Once those are shored up, Trent seems to argue, you're going to need his little patches to save cash, which is something Ramit's plan doesn't look at. Or, more succinctly, Trent wants to squeeze every dime and put every penny to work for him; The Scrooge Strategy is about buckets.
Naturally, Sethi didn't exactly like his brand new launch being called "shortsighted", and really, I think that the term was a very bad choice of words on Trent's part. He could have said, correctly, that the Scrooge Strategy is for a different set of readers -- those who've already implemented large fixes and are looking to get that little bit more milage out of their paycheck, for the coupon clippers and wives with three kids. His readers are middle aged, past the time in their career when looking good at work and taking riskes to get ahead are necessities rather than options. Trent's readers are older, more settled, and looking to pinch every penny to the copper -- make your own laundry detergent, grow your own food, galvanize your own rubber for your own tires! (Okay, I made that last bit up.) Sethi's readers, by contrast, are more in my demographic -- young, urban professionals who are more likely to rent than buy, who within the last five years graduated from college and still have to look their best to get ahead, fight to prove themselves at work, and be social to establish a solid network of peers that they can look to for careers, friendships, and power-base-forming. These groups are diverse and have different needs. Trent's group probably has lowered the APR on their fee-free credit cards, they probably own a home rather than rent and don't need to renegotiate their leases.
So, instead of short-sighted, he should have said "foundational". Sethi's strategies are foundational in personal finance, but for those who've established a solid base in their personal finance, it won't give them the little wins, the small psychological victories that saving $3 a month by getting an extra two weeks out of a tube of toothpaste will.
But no, he said "short-sighted" and Ramit Sethi got offended and offered a challange.
Over a period of 1 month, starting Monday, March 2nd, I say we each pick a group of 50 readers and send them 4 tips. (I’m just going to take the first 50 people that sign up for The Scrooge Strategy.) I propose that we’re also allowed to do one hour of private instruction to them (webcast, phone, email, etc), but no more. We let the tips stand on their own.
At the end, we see which group has saved more — the Scrooge group or the frugality group. And I’m willing to bet, if you are: I suggest the loser pay $1,000 to the charity of their blogs readers’ choice.
Trent — will you take my challenge?
Trent, well, declined -- possibly after shitting himself and finding that the one-square-of-toilet-paper-per-use thing really doesn't cut it; possibly after rolling around in his giant Scrooge McDuck money vault and having a cash fight with his family.
Rather than declining the challenge, though, Trent wrote a post called The "Challenge" (heaping the insults on there or misusing quotes?) and basically said in several paragraphs what I said in one (and what he should have said all along) -- that there are different demographics for different websites, and really, we should be doing both -- the big gets and the little wins.
Anticlimatic? Absolutely. But in the end, he's right--we should strive to achieve both the big gets and little wins. Of course, when you're first starting out and you feel broke and financially ruined, the big gets are going to have a bigger impact -- both fiscally and psychologically -- than the little wins. And an explanation is not an apology; Trent still needs to man up and say that he erred when he said "short-sighted" and again when he said "Challenge" (by using quotes, he belittled the gauntlet thrown -- unless he's just misusing quotes, but a man who really wants to be a published author really shouldn't be doing that, now should he?) He needs to apologize, and not necessarily to Ramit, who's probably over it by now, but to readers -- readers like myself who expect better of a man to bitchslap a blogger twice and then pretend that it's justifiable if he finally backpedels into a position that is technically correct.
I think my face has been condensed to cover only 1/8th of my enormous bean-like head. read more
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