Tuesday, May 6, 2008

The Five Stages of a Product’s Life: Saving You Money on Replacing Expensive Household Items

Author: Nick
Category: Money
Topics: , ,

comic 22 - product life stages

The end is near for my five-year-old laptop computer. I built this thing myself from parts just before my last semester of college. I’ve replaced just about every part since then at least once except for the casing and screen. Unfortunately I’ve just about reached the end of the line for what upgrades and repairs can do to keep it going. The keyboard is missing several key caps (I pulled off one of the “Ctrl” keys and put it where the “E” was), the power supply jack is wiggly, the memory capacity has been maxed out at 2GB, and the hard-to-reach internal Wi-Fi died long ago. Still, the laptop is capable of performing as well as a laptop you’d pay $800 for today, but it’s only a matter of time until a major component fails or more of the casing starts to fall apart and I’ll replace it altogether. My laptop is at Stage 3: Wait and See.

For a few years now, I’ve used a system of assigning ratings to expensive items I own in order to track where they are in their useful lifespan and make budgetary plans for items I may soon need to replace. For instance, a brand new item at the peak of its performance is in Stage 1: Good As New while that same item that just broke in half and no longer works probably belongs in Stage 5: End of Life (though it might only be in Stage 4: Obsolescence).

What exactly do these ratings mean, and how can they save you money? Let’s look at each rating and consider the circumstances under which you would use each of them.

Stage 1: Good As New

If you just went to the store and bought a product off the shelf, it should fall into this category. And if you properly use and maintain that item, it should stay in this category for a long time to come. Items that are Good As New are in flawless or nearly flawless condition and are as good as or even better than similar items currently on the market. Every feature of the item still performs as well as the day is was built. Good As New is obviously the best category of products to own, but it certainly isn’t the cheapest.

Product Examples:

  • A new car fresh off the dealer’s lot.
  • A refrigerator you just bought new at the appliance store.
  • A refurbished DVD player you bought for $100 less than a brand new model.
  • Your grandmother’s set of cookware, painstakingly maintained and better than anything you can buy on the market today.

Notice that Good As New doesn’t necessarily mean “brand new.” In fact, the age of a product is often irrelevant to its life stage. What matters is the condition. Some items, including many appliances and tools, can be kept in Good As New condition for decades with careful maintenance. (Others, like pretty much any consumer technology product or gadget, can be in perfect condition yet still fall out of Good As New status. More on that later.)

When to Replace: Items in the Good As New stage should almost never be replaced. Instead, money that would have been spent replacing the item can be used to repair and maintain the item to keep it in Good As New condition. If you’re in the habit of replacing items that are Good As New, you might as well take your existing products to the store, give them to the store for free, and then buy the items back from the store. Yes, replacing Good As New items is that dumb.

Less than 1% of new products you buy should be to replace items in the Good As New stage.

Stage 2: In Working Order

You probably think most of the items in your household right now fall into this product life stage. (And you might be right.) Products In Working Order still do the job they were originally tasked to do. They work well, they might be a little old, but there’s something newer or better out there. If you had an infinite supply of time and money, you would throw these items in the trash and buy some Good As New ones instead.

Product Examples:

  • A 12-speed whatchamacallit when they just came out with a 15-speed.
  • A fairly-equipped five-year-old car with no mechanical problems.
  • A basic toaster that still toasts toast.
  • Any functioning iPod that’s more than six months old.

Even without much maintenance or care, many products will stay in the In Working Order stage virtually forever. Unless something malfunctions or degrades due to wear and tear, that basic two-slice toaster could very well toast your great-grandchildren’s toast. Don’t try to tell them that though, because they’ll be using their 30-slice laser toaster while you’re still using Old Toasty.

When to Replace: If a product in your house is In Working Order, you should try to hold off replacing it for as long as possible. The toaster still toasts your bread like it did when you got it ten years ago; it just doesn’t toast the face of your child’s favorite Sesame Street characters into it like some of the new ones do. Or maybe it toasts 99 slices out of 100 properly, but it turns that unlucky one slice into charcoal. Instead of replacing In Working Order items with Good As New ones, you may be able to repair it or even enhance it with replacement parts (like I’ve done with my laptop).

Sometimes, though, it does make sense to replace In Working Items simply because newer versions with useful features or lower maintenance and operation costs exist. Since the current item is still doing the job, you should take your time to research newer versions and wait for a really good deal to come along. But only 5% of products you buy should be to replace items In Working Order.

Stage 3: Wait and See

Items that fall in the Wait and See stage of life are still quite useful and typically in fairly good condition, but they may have some problems or may be moderately out-of-date. You may be able to hold out for some time with an item that is Wait and See, but there are certainly a growing number of advantages to finding a replacement in Good As New or In Working Order condition.

Product Examples:

  • My good old 1991 Nissan Sentra.
  • A low-efficiency but working furnace that still keeps you warm during the winter.
  • VHS tapes, or any other entertainment medium for which players are becoming rarer.
  • My cell phone; it calls people and that’s about it.

Hanging on to items that are just Wait and See can sometimes be painful. Your neighbor certainly isn’t helping when he brings home a 10-speaker surround-sound entertainment system while you’re still watching TV on your 19-inch Sorny-brand tube.

When to Replace: Wait and See items belong on your Christmas list, even if Christmas isn’t for another six months. That said, you may want to replace the item yourself, especially if a newer item comes with great features that’ll save you time or money. But before you zip on down to the nearest big-box store, you’ll need to do your homework. Can your current product be repaired at a reasonable cost? (And if so, is there a good chance it will break again before long?) If repairs are out of the question, shop in-store and online for a replacement, comparing a variety of items and feature sets. Since your current item is still doing (most of) its job, you can afford to take your time here. Once you’ve found the right replacement product, consider selling the old one on your favorite internet market place or at a yard sale to help recoup some of the cost of your new purchase.

No more than 15% of products you buy should be to replace items at the Wait and See stage.

Stage 4: Obsolescence

You probably don’t have too many items in this category lying around the house; if you do, they’re probably gathering dust in the attic and you may have a bit of a pack-rat problem. Items in the Obsolescence stage suffer either from moderate to major mechanical failures that would be expensive to repair, very high maintenance or operation costs compared to newer versions, or incredibly outdated feature sets. Even if they still perform some of their original functions, you’re almost embarrassed to still own these products.

Product Examples:

  • The car you spend $4,000 to repair every year. And there goes the transmission…
  • Your desktop computer that can run Windows 98. Barely.
  • A two-slice toaster that only toasts one slice at a time, and it takes 15 minutes to do it.
  • Your 30-year-old vacuum that still sucks up 99% of dirt in your carpet… and redeposits 40% of it on your hardwood floors.

When to Replace: The typical item that has reached the Obsolescence stage in your average American household will get replaced inside of a week. That’s not always a bad thing, but it does mean that most people don’t shop around first for a good deal. Just because your washer and dryer are on their last legs doesn’t mean you have to replace them today. You might be able to bum a couple of loads off of neighbors, or you could always hit up your friendly local laundrymatista. For entertainment or convenience products, you may be able to wait quite a while for a bargain price to come along before pulling the trigger.

Still, you may not be in a position to wait months or even weeks to replace items you use frequently such as major appliances, automobiles, or computers. As usual, consider the repair cost and frequency before dropping a wad of cash for a Good As New replacement. If fixing the product isn’t possible and its days are numbered, start frequenting internet deal sites, keeping a close eye out for prices that are “good enough.” You might not be able to score the deal of the year based on your timetable, but you don’t need to settle for the first new item you see.

30-50% of products you buy should be to replace items at the Obsolescence stage.

Stage 5: End of Life

It’s over. Finito. Kaput. Your product has gone to that great junkyard in the sky. You might as well not even own the item anymore. (It might be cheaper that way for some things, since large appliances can be difficult to haul away.) If it’s a product you absolutely need right now, then you better hit the road (assuming it isn’t your car that bit the bullet) and do some serious shopping. Hopefully you saw the untimely demise of your product coming (i.e. it didn’t just jump from Stage 1 to Stage 5 overnight) so you’re already looking around for a replacement.

Product Examples:

  • The only thing coming out of your toaster toasted is itself.
  • Your car just exploded. A lot.
  • You now have two whole-house heaters: your furnace and your air conditioner.
  • You just burnt dinner, your whole house is smokey, and the smoke detector with the new battery just sat there silently.

When to Replace: As with items in the other stages, consider if repairs are possible and economical. If they’re not, determine your timeline for replacement. Much like items in Obsolescence, End of Life items may not need to be replaced right away if they’re products you don’t use all that often. If your portable MP3 player just played its last tune, you’re certainly not going to die if you wait a week or two for a good deal on a new one unless you have some sort of strange disease where you need to hear music all of the time or else your brain implodes, which you don’t. Even items you think you need to replace today—dishwashers, microwaves, televisions—can probably wait a bit… at least until you have a chance to scour the internet for a baseline of prices.

And if the idea of dropping a ton of money on a Good As New item makes your stomach turn, you could always look for an item In Working Order or Wait and See condition. Some products, like cars and electronics, are easy to find used at a good price and in good shape.

50% or more of products you buy should be to replace items at the End of Life stage.

By keeping your product replacement habits in line with the suggested budget percentages listed in this article, and by taking care of the things you already own, you can help control the natural consumer impulses to buy the newest, biggest, and best items available. And if following this advice means that you end up with a house full of items in Stages 2 to 5, don’t be embarrassed; be proud that you’ve resisted the urge to splurge needlessly.

As for me, I’m still on the lookout for a new laptop, so hopefully no more keyboard letters fall off until I can find one at a dcnt pric. Oh crp.

Friday, May 2, 2008

Making the Most of Your Money at Summer Movie Blockbusters

Author: Nick
Category: Money
Topics: ,

comic 20 - movie theater

It’s looking to be a big big summer at the box office this year. Tons of highly-awaited movies are coming soon to a theater near you—movies like Old Guy With a Funny Hat, Old Woman Looking to Get Some, and Kids in a Crazy Magic World. With so many great films, and with ticket prices approaching the price of a semester of Harvard tuition, it won’t be easy to choose which ones will get your hard-earned entertainment dollars. Use this guide to help you maximize the bang you get for your movie buck this summer.

  1. Catch a matinée. Do you really need to see that movie at 9 o’clock at night? Here’s a tip: they show the same movie at 2 in the afternoon, and the ticket prices are usually a good deal cheaper. Some theaters have matinée showings that start as late as 4pm so you can catch a flick and still be able to spend your $100 for overpriced restaurant food.
  2. Check for discounts and special offers. You might be able to shave a buck or two off the regular ticket price by presenting your AAA or other association membership cards. Also look in the back of Entertainment Books (on sale for as little as $5 now) for coupons that’ll knock a few dollars off even full-price admissions. Be sure to read all of the fine print with any discount offer as some promotions can’t be used for new releases.
  3. Go for the dinner/movie package deal. Some restaurants close to movie theaters will offer discounted tickets with a meal purchase. If you were planning to dine out anyway, you might as well take advantage of these offers. Just make sure you’re not walking into a super-pricey restaurant.
  4. Don’t order tickets online. Yeah, it might seem like a smart idea to order your tickets over the internet and print them out at home or have them waiting for you at the theater, but there’s usually a fee that’ll tack an extra 10-20% on to your ticket price for ordering them online. Unless you’re worried that a hot show is going to sell out before you get to the box office, don’t pay extra for a pseudo-convenience.
  5. Sign up for movie rewards. Just about every major theater chain has a reward program that’ll give you something like a free small popcorn after you see 37 movies. It’s not much, but there’s no need to leave free stuff on the table.
  6. Skip the popcorn. Seriously, why are there not laws against five bucks for ten pieces of popcorn? And what sadistic jerk thinks that selling a 50-cent package of M&Ms for four dollars is okay? With prices like that, you have a duty to sneak your own snacks into the movie. Just be careful where you hide them since some movie houses now search bags for hidden video cameras. (Personally, I find that strapping some Skittles to my wife’s upper thigh is a smart and sexy way to enjoy a treat at the movies.)
  7. Look for second-run theaters. They’re hard to find nowadays, but these hidden gems can save you big bucks and still let you catch newer movies in theaters before they come out on DVD. Ticket prices start from just a dollar or two, so it’s worth it if you don’t mind waiting until everyone else has stopped talking about the movie to see it.
  8. Don’t buy into the hype. You’re not going to die if you don’t see Spiderman 12 and Harry Potter and the Sandwich of Magnanimity in theaters. For less than the price of just two theater tickets, you’ll be able to buy the DVD when it comes out. Or you could rent it for much less than that. Or you could just give the movie industry the finger until it decides to stop cranking out sequel after lame sequel, which will be never.

Now you can go see that horrendous insult to a classic anime series or whatever crap DreamWorks’ computers spit out this year and still have enough money left over to build that flying robot suit you’ve always wanted.

Tuesday, April 22, 2008

Budgets Are Overrated

Author: Nick
Category: Money

comic 16 - budget

(My apologies to the 17 people who just had heart attacks after reading the title.)

I’m sorry, but it’s true. While any personal finance expert will tell you that you must have a budget or else you’re going to spend all of your money and end up homeless and destitute, that’s not always the case. For example, I know for a fact that there’s a guy in Kansas who doesn’t have a budget and he has $8,000 in the bank right now. Shocked? I was too!

All right, I’ll stop being a smart-ass for a minute. (Stopwatch start.) It’s very possible to survive and thrive financially without putting together a detailed budget and sticking to it. I know a few people who do just that, but they’re either too rich to spend all of the money they have no matter how hard they try, or they work too much to have a chance to spend it all.

And then there are people like Stephanie over at Poorer Than You—someone who doesn’t have a budget or a million dollars, and she’s doing just fine, thank-you-very-much. Oh, and before you ask, I do have a budget, but if you promise not to tell anyone, I’ll let you in on a little bold-texted secret:

I totally ignore my budget.

If I fire up Quicken, you’ll see that I have a very nice little monthly budget that looks something like this:

Housing 35%
Groceries 5%
Dining 5%
Entertainment 5%
Utilities 5%
Education 5%
Charity 5%
Ceramic Rooster Collection 5%
Miscellaneous Expenses 5%
Straight to Savings 25%

When I first put this budget together a couple of years ago, I religiously checked it against our actual expenses every month for several consecutive months only to find out that we never came close to overrunning our budget numbers. So I stopped checking. And you know what? Looking back now, sometimes we went over our budget numbers. For example, in December of 2007, we spent 7% of our income on charity. And yet, we still met our savings goal for the month. How? Well, in my mind, I knew that we were giving a bit more to charity that month (though I didn’t know exactly how much), so I cut back on funding my ceramic rooster collection a bit.

Some other months, we only contributed 25% or 20% or even 15% of our income to savings due to unexpected or higher-than-usual expenses. But then other months, we contributed 30% or more of our income to savings.

For all intents and purposes, we don’t have a budget since having a budget sort of implies actively following it and trying to meet it consistently. In any given year, we do meet our budget—and with plenty of room to spare—but it’s not through excessive penny-counting or obsessive record-keeping. It kind of just… happens.

Well, maybe it doesn’t just happen. We do have some degree of natural financial discipline, so we’re not in the habit of dropping $3,000 on a whim. Plenty of people don’t have that sort of discipline, so a budget might help them guide their spending and meet their financial goals. But saying that everyone needs a budget is just plain wrong. Sounds like someone should rename their software to something not so insisting.

Perhaps a better way of putting it is you either need a budget or the financial discipline to function without one. (Stopwatch finish.) I guess that means only reckless people need budgets?

Tuesday, September 4, 2007

Five Tips for Stopping Wallet Leakage

Author: Nick
Category: Money
Topics: , ,

give the gift of stinginess

by Rhonda Jones

Everyone says they need to save money, but few people really know where most of the leakage in their wallet occurs. Sometimes it comes from just being too freaking nice. People who buy things from acquaintances so they won’t hurt their feelings, people who buy things from strange little girls because the Nice People’s Manual says they should, and people who equate spending money on someone to loving them all wind up with deadly hemorrhages in their wallet.

You must, however, be strong. Don’t spend money on someone just because they want you to. Everyone–television salesmen and best friends alike–is after your hard-earned money. It is your job to keep them at bay. Getting in touch with your inner Scrooge can help you do that.

  1. Don’t give at the office. When a coworker approaches you with a catalog full of things you don’t need that her child is selling, Run The Other Way. Seriously. Do not buy that stuff. If you absolutely must give away your money, fit a donations column into your budget. Then make sure you avoid everyone with a catalog or brochure and puppy dog eyes.
  2. Avoid Girl Scouts at all costs. Especially in February when they’re hawking cookies. They’re cute but they want to put their sticky little-kid fingers into your wallet. And they may want to eat your brain as well. Jury’s still out on that one.
  3. Cancel Christmas. Christmas presents are nice, as long as you are getting things you can afford for people you want to give them too, not signing up for a second mortgage so you can try to avoid being on Aunt Thelma’s List of People Who Don’t Mortgage Their Homes To Buy Me Gifts List. When it’s time to sign up for a gift list in the office, call in sick. Or dead. Or drunk. Or create a religion that prohibits gift-buying.
  4. Beware of other special-day gifts. Granted, it’s a little bit weird to show up at a bridal shower without a gift in hand. Get something good–not something you have to mortgage the house for, just something useful–for any friends who are having babies or getting married or having birthdays. For friends. People allowed into your inner sanctum. These people generally know things about you you’d rather pretend had never happened, so you may need to keep them quiet by getting them Good Friend Gifts. But, for crying out loud, don’t spend a bunch of money on gifts for people you barely know.
  5. Don’t spend a bunch of money on gifts for people you know really well, either. If you’re constantly spending money on your wife or girlfriend because she whines like a stuck kitten if you don’t, either get another partner or put this one on a serious spending diet. Explain things to her and then stick to your decision. This goes for mothers, fathers, cousins, children, hamsters and anyone else who regularly raids your pocket. If you need to purchase a set of balls first, consider it money well spent.

None of this means that you have to suddenly become a selfish, no-gift-giving, soulless individual. You can work up to that gradually. Scrooge may have had a lot of issues, but one thing he didn’t have was a second mortgage on the house.

1 Star2 Stars3 Stars4 Stars5 Stars (4 votes, average: 3.75 out of 5)

Eleven years’ alternative journalism. Freelancing in Europe. Vampires. Need I say more? Read Rhonda’s writing blog, One Writer’s Ridiculously Glamorous Life, at http://silkynightmares.blogspot.com.

Thursday, August 16, 2007

Spending More With Credit Cards Than Cash: It Doesn’t Apply to Everyone

Author: Nick
Category: Money
Topics: ,

It is widely known that people tend to spend more with credit cards than if they use cash. Supposedly this is because you can “feel” cash leaving you.

scientific looking diagram, so it must be trueFrom a scientific perspective, the paper bills passing through your hands release tiny particles found in the ink used to print money. Those particles travel through your bloodstream, sending a signal through your nerves straight to your brain which responds by releasing chemicals that make you feel remorseful (see diagram, top). The plastic of credit cards does not cause the same biochemical reaction, so you don’t get that feeling of regret (see diagram, bottom).

Okay, I just made up all that crap. But it’s still generally true that most people spend anywhere from 10-30% more when using credit than when paying with cash.

But I’m not most people.

As I’ve discovered in the last week, I tend to spend more when using cash than when using credit cards. And I think I know why:

  • Cash tends to come from “nowhere.” I rarely have cash in my possession. If I ever do, it’s not on purpose. Usually it’s a gift or it comes from selling something I don’t need. I view it as extra money, so I’m more inclined to spend it on frivolous things.
  • Cash doesn’t make it to my books. Because of the way cash typically enters my possession, I almost never log it in my personal finance tracking application of choice. And I don’t log receipts for transactions I pay in cash either. Thus there’s no line item in my monthly spending report to make me feel guilty for spending $60 in cash on two hot dogs at a baseball game.
  • I don’t like cash. Cash takes up precious room in my wallet, and it invariably spawns something I hate even more: loose change. The sound of coins clinking in my pocket–ugh, it sends shivers through me. Perhaps I spend cash quicker because my subconscious is working to get rid of it faster. Of course, I could just deposit it in the bank, but going to the bank is another thing I don’t like doing.

So do you fall into the typical behavioral pattern of spending more with credit cards, or do you part with cash easier like I do?