There’s a concept in finance called “cost-benefit analysis” which involves calculating whether an item’s cost outweighs its benefit. For example, I spent 8 hours yesterday cleaning the apartment I just vacated. If I had bothered to perform a cost-benefit analysis, I would have asked myself whether or not the cost (8 hours of my time on my day off) was worth the benefit (a savings of about $150 of my deposit). Is my time worth $18.75 an hour? Or were those 8 hours worth more than spending time with friends or family? The answer, sadly, is probably not. But it brings up an interesting thought: how much time should we spend concerned with our personal finances.

If you wanted to, you could spend almost 24 hours a day worrying about your finances. You could build budgets, track stock movements, read personal finance books, and watch CNBC form the moment you woke up until the moment you slept. The truth is, there’s a lot of advice out there concerning money (including this blog) and there’s no way you can possibly learn everything there is to know. On the other hand, you can’t ignore money – it’s a part of our everyday life. So the question is, how much should you worry about money?

The answer, similar to most of my advice, is somewhere in the middle. And part of it has to do with your own self assessment of how important money is to you. In order to help you figure this out, try ranking the following items from 1 to 10 – 1 being the most important to you and 10 being the least:

• Immediate family
• Extended family
• Friends
• Money
• Shopping
• Sports (watching or playing)
• Working
• TV/Movies
• Video Games

After some internal reflection, look at where money ends up in relation to other items on your list. If money is one of your top 3 choices, then I would assume that you are already faithfully checking your stock portfolio, 401(k) performance, and reading up on the latest and greatest personal finance topics. For those of you not as “obsessed” with your finances I would recommend setting aside at least one day each year to focus on your personal finances.

While your personal finance situation will most likely determine the kind of life you will lead (either now or in the future) don’t you think that dedicating at least 8-10 hours a year is worth it? This day of personal finance mastery is not meant for you to pay bills, but to go above and beyond your normal day-to-day financial activities. Take a day off work… use a holiday such as Labor Day (hint hint)… whatever you do make sure you have time to dedicate to this activity.

Suggestions for things to do include:

• Calling credit card companies to negotiate better rates.
• Updating your list of important financial information in case of emergency or death. Try something like this Financial Life Details (pdf) worksheet from Merrill Lynch.
• Update your will and/or trust documents. This may not seem “financial” in nature, but your will or trust has strong links to your financial portfolio.
• Organize your important financial documents, statements, or information for easy access on a day-to-day basis.
• Review your tax withholding amounts and re-examine whether or not you should change them.
• Consider setting up automatic withdrawals for savings, upcoming vacations, car repair, etc. using one of the popular online banks. (Personally I love the ING “sub-accounts” I can create to sock away money)
• Re-examine your insurance premiums and evaluate whether you are over or under-insured. It may be time to shop around for a new policy as well.
• If you haven’t done so lately, evaluate the returns in your investment portfolio and consider re-adjusting your mix in response to major life events or your current age.
• If appropriate, set up a 529 college savings plan (be sure to let relatives know they can contribute to it in lieu of presents).

The list could go on and on, but the important point is to set aside time to actually think about your current financial situation and evaluate how well you are accomplishing your goals. If you’re falling short, begin to research what you can do to improve. Do you need to ask for a raise? Cut back on spending? Move to a more affordable location? These are all questions you can ask yourself once you’ve taken the time to reflect on your personal finance situation – but are difficult to answer during your monthly bill-paying binge.

Kiplinger’s Personal Finance has a nice article called 20 Ways to Waste Your Money.  It’s an article that shows some ways to spend your money a little more wisely.  Some of the ideas have been discussed on this blog, but I found some other excellent points as well.  One point that was new to me was about using the dollar store.  I tend to avoid those stores, but it’s actually a good place to get greeting cards of 1/7 of the regular price.  I found the article good for all economic times, not just recessions.

I don’t know if it’s just me, but lately I think I see far more get-rich-quick schemes on TV. Dean Graziosi just came out with a special real estate book for a down market (you can only buy it off TV) and I’m starting to see more of Donald Trump selling his seminar.  These programs offer a lot of promises, but they can’t guarantee much.  I don’t have a get-rich-quick scheme, but I do know of some ways to get some extra money without exerting much effort.  These won’t make you wealthy by any means, but it may take the edge off a little bit; maybe reward yourself with some ice cream or something.  What follows are a few ways to make some extra pocket change.  All you need is a computer and a little time.

Online Surveys: There are a myriad of companies that reward people for completing surveys.  Most surveys take from 10 to 30 minutes to complete; the time varies based on the number of questions and how quickly you can navigate through the questionnaire.  All you have to do is join a panel for one or more of the companies and you’ll start receiving surveys.  Most companies will have you fill out a profile questionnaire so they can send you specifically targeted surveys.  Each company rewards users differently from points to drawings to cash, and sometimes a mix of all three.  One thing to remember is that you should never pay to join a panel.  If a survey company is going to pay you money, there is no reason they should require money from you to join.

Because I used to work in the market research industry, finding this method of earning extra cash was pretty easy for me.  The key is finding the good companies.  Here are a few of the ones that I trust and that provide reasonable rewards:

Greenfield is the first panel I ever joined.  My first experience was negative.  I earned points for magazine subscriptions, the choices were lame, the magazines never came, and I kept getting charged for the subscription because of some auto-subscription deal.  I’ve given Greenfield another chance and they are much better now.  They’ve moved to giving cash for many surveys, plus entries into drawings for a larger cash prize.  So far I’ve had no issues.

Survey Spot is the second panel I ever joined.  Survey Spot has been the most consistent company in my experience.  Like Greenfield they offer cash on some surveys and entries into drawings on all surveys (you can qualify for the drawings even if you are disqualified from the survey).  I don’t have much hope for winning a drawing, so I tend to only do surveys if they specify a cash amount (usually between $2 and $5).  I’ve never had any issues with this company.

E-Rewards is yet another company I use pretty regularly.  I was introduced to them by somebody I knew who worked in market research and my experience has been pretty good.  To join the panel you do need to have a membership with one of their sponsor companies; for example I was able to join because I have a Borders Rewards card.  The rewards are essentially points, they call them dollars but you can only buy from their ‘catalog’ of goods.  Most of the rewards are magazine subscriptions.  Unlike my first experience, I actually get the magazines and they do not auto-renew.  The selection changes, but for the most part it’s a good selection.  There are various other  rewards, like airline miles for a number of different airlines or borders bucks.

MyPoints: MyPoints is a glorified advertising company.  You sign up and get points for reading email advertisements; all you have to do is click on a link to earn the points.  I get about 5 emails a day and I just click on the link and build up points.  You can also earn points by purchasing from a member site via the MyPoints website. The companies are reputable, like LL Bean, Barnes and Noble, and Old Navy to name a few.  I don’t buy much online and it takes me about 6 months of checking my email to earn a $25 gift card.  It’s not a big money maker, but the gift cards are easy presents for B-days and Christmas (nobody will ever know).

Mystery Shopping: I haven’t done any mystery shopping, but it is a legitimate business.  The basic premise is a company pays you to patronize their business and evaluate the experience.  You could be asked to visit a local McDonald’s and rate the service and food.  You will paid enough to cover costs if you are required to make a purchase, and often something extra for your inconvenience ($10-$15).  Mystery shopping has the potential of scams.  Recently a scam was exposed where folks were being asked to wire money using Western Union.  Any mystery shopping deal that promises high returns is a scam.  Mystery shopping is not lucrative!  It just takes the edge off a little.

Cha Cha: I was recently made aware of a company named Cha Cha.  It’s basically a search service for folks looking for quick answers to questions, but they don’t have convenient internet access (usually somebody with a cell phone that can text).  Cha Cha offers positions called Cha Cha Guides to look up the answers to the questions that come in.  The pay isn’t a huge money maker ($.10 – .15 per response), but it’s consistent and is likely more interesting than a number of other options.  Cha Cha provides an estimate that most people will make in the $5-9 per hour range.

You won’t be rolling in the dough or hangin’ with Donald Trump if you use these sources, but it will provide a little extra cash.  With any simple task, the returns won’t be huge, but they’ll be legit.  When high returns are promised, that should be a major red flag.  Most of this work is low skill with many willing people; i.e. low demand (relatively speaking) – high supply.  Smart Money has a nice little article on “work-from-home” scams that’s worth reading.  While I use some of the companies above and have found success with them, it’s still important to do your own research to make sure that you are comfortable with the requirements.  This is not an advertisement for any of the companies, just a starting point on where some extra cash can be made and legitimate sources.

Within Senator Christopher Dodd’s 630-page Senate housing legislation is a provision that nobody knows about, but affects the privacy and operation of nearly all of America’s small businesses. The provision, which was added by the bill’s managers without debate this week, would require the nation’s payment systems to track, aggregate, and report information on nearly every electronic transaction to the federal government.

Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee.

What does this mean for you and me?

If you’ve ever sold your old iPod on eBay, chances are you won’t be affected since you’ll be getting only a fraction of what you originally paid for it and the income isn’t taxable. However, if you’re one of thousand of eBay sellers and other small business owners who accept PayPal or any other electronic form of payment… that information could be now reported to the IRS.

Of course eBay sellers and small business owners should have been paying taxes on this income all along, but the fact is… they haven’t. For example, if you make money online using Google Adsense, Google isn’t required to report your income to the government until you’ve earned over $600. And since the income isn’t reported, most people don’t report it as income on their 1040. In fact, the government estimates that this bill will bring in an additional $9.802 billion over ten years.

Whether you report your small business income or not, this bill could be an invasion on everyone’s privacy. If you’re concerned, be sure to write your representative.

If you’re considering starting a home-based business then you should probably know that most of them are scams. In fact scams about home-based businesses probably make more money than actual home-based businesses.

If you’re looking for a home-based business where you might actually make money, Yahoo Finance has a list of the Top 25 Home-Based Business ideas, including Yoga Instructor, Accounting, Web Design, Gift Baskets, and Computer Repair.

If you’ve read this blog for any length of time, you’ve probably picked up on the fact that I’m a strong believer in responsibility. I’ve ranted before about how I believe that people are too quick to claim their rights and far too slow to admit or assume any responsibility.

I realize this is a blanket statement, but apparently I’m not the only one who has seen this trend. Jeff Zaslow at the WSJ recently wrote an articled entitled “Blame It on Mr. Rogers” where he attributed this sense of entitlement to Mr. Rogers and his habit of calling everyone “special.” The article wasn’t written literally – and certainly wasn’t a jab at Mr. Rogers – but the article created quite a stir and over 1,000 people contacted him about it.

So Mr. Zaslow followed up his Mr. Rogers article with another one called “The Entitlement Epidemic: Who’s Really to Blame.” Instead of blaming only one single dead celebrity (yes, I’m using that term loosely) he lists several reasons why children and young adults today seem to have the innate sense of entitlement, including:

• Indulgent Parenting
• Consumer Culture
• The Self Esteem Movement

I won’t take away from Zaslow’s article, but I will share my favorite quote.

Susan Lewis, who teaches at University of Maryland Eastern Shore, calls the cellphone “the world’s longest umbilical cord.” At her school, when students don’t like their grades, some come up after class, hand over their cellphones and say, “My mom wants to talk to you.”

Hopefully by now you’ve taken my advice and claimed your telephone tax refund on this years’ tax return. If not, you can see my post here begging and pleading for you to do it. But why am I so insistent upon this?

The main reason is that the government takes enough of your money and wastes it away on $200 hammers – it’s your right to get some of that back!

But today I found another reason – to donate it to a good cause!

RefundsForGood.org explains, in great detail, the phone excise tax. There is even an interactive timeline where you can learn about the tax and how it came to become part of American history in 1898.

There are also step-by-step instructions on how to get your phone tax refund amount back using the standard exemption method, as well as via the full 41 month audit method.

But the best part of the website is your ability to donate your telephone tax refund to a number of different charitable organizations. The website hopes that some people, who are able to, will contribute their phone excise tax to one of the worthwhile non-profits on the portal.

The site is very well done, with celebrity endorsements on the site such as Martin Sheen, Larry Hagman (“JR”), Ed Begley Jr. and Nate Corddry (from the Daily Show) – along with 13 Nobel Peace Prize Laureates from the Dalai Lama to Bishop Tutu.

So if you’re feeling in a giving mood, please consider donating your telephone tax refund to a good cause!

Have you ever wondered if those online rental deals (Blockbuster, Netflix, etc.) are really worth it? Well, I spent the last four months using Blockbuster Online and thought I would share some real-world results with you.

In general I love the online movie rental idea. I love the idea of coming home every other day or so and finding a new movie in my mailbox – not only because the mail makes me feel special but because I never have time or the energy to drive down to the video store. I originally chose Blockbuster Online because of the 2 free in-store rental coupons that you can print from home. These handy coupons allow you to run to the video store on a Friday night when you have a craving to see that new action movie that just came out this week. However, after four months I left Blockbuster Online for Netflix because I couldn’t stand waiting all week for my rentals to come in the mail – and so far Netflix has been outstanding in that regard.

I should mention, however, that the results presented here are not “scientific” in nature and are by no means the only research you should do before subscribing to either service. Instead, I hope that you use this information as a general impression by a “real” user and not a cashier from Blockbuster trying to sell you their newest service. That said, here are some facts that you should be aware of:

• The data provided here is based on a fairly consistent rental schedule. I never keep a movie for more than two days in my home – so as the data suggests, there were some times when Blockbuster was painfully slow at sending my movies to me.
• Most of the time I would watch my new movies the very night I received them and then throw them back in the mail the next morning.
• I subscribed to the package that allowed for 3 movies to be out at any given time

  

  As you can see, over this 4 month period, I spent an average of $2.63 per DVD rented. Compared to my local store rental price of $3.99 that’s a $1.36 savings for each DVD rental. If you are thinking about joining an online rental service such as Blockbuster or Netflix find out what the monthly cost is and then project how many DVDs you would watch in a typical month. Using this information you can tell if the service is worth it.

  For example, with the data presented here, I would need to rent 5 movies a month just to make the service worth it. If you don’t watch more than 5 movies a month then perhaps a cheaper version of the service is the way to go – or perhaps you should just stick to the “old fashioned” way of renting movies.

Blockbuster, Movies, Personal Finance, DVD Rental

I found an interesting article today which linked to snopes.com – a popular urban myth debunker – concerning the 10 top financial urban legends. They are:

1. You can float a check longer if you write in red ink.
2. You don’t have to pay income tax — it’s illegal.
3. I’m under 18, so I can’t be held accountable for a debt.
4. My hotel key card has my credit-card information.
5. Boycotting a few gasoline brands brings gas prices down.
6. It’s better if you don’t sign the back of your credit card.
7. You can make a pile of dough by helping a foreigner solve his money problems.
8. You can now opt out of having credit bureaus give your information to anyone who asks.
9. You can buy your way out of points on a speeding ticket.
10. Hotel Bibles often have $100 bills tucked into them.

If you happen to think that any of the above myths are true – think again. Take a few minutes and read the entire article, along with explanations, here.

urban legend, personal finance, money