Sunday, August 31, 2008

Fashion on a Budget: Dress up your life

I'm not sure how you all feel about my fashion posts, since this is a finance site more than a fashion one, but am I posting them too frequently? Too infrequently? Is it strange going from reading about Forex to what to wear on a budget? I kind of fancy the finance & fashion angle, but let me know what you think! It'd be great to get feedback.

Anyway, Love and I were at Baja Fresh yesterday (I'm a sucker when it comes to their fish tacos), and I realized after we sat down to munch chips at a table near the salsa counter that more than a few people were looking at me. I wasn't sure why. In fact, I assumed it was because I had salsa on my face or something to that degree. I admit, my love for Mexican food can get a little crazy at times. But after quickly checking with Love that my face was sans salsa, I realized they weren't looking at me per se, they were looking at my clothes. More specifically, my new patent dark brown reptile skin clutch, and sleeveless, full-skirted khaki dress with dark brown belt cinched at the waist (overall very adorable, very 1950s). When I say "they," I obviously mean the women and occasional fashion-forward gay man ... and I realized they were smiling -- they loved the outfit ... and yet they all wore sweat pants and shirts.

Well, the first thing I wanted to do was stand up on the table and rouse the entire restaurant to dance choreographed behind me as I belted out the lyrics to West Side Story's "I Feel Pretty" into a salsa ladle (with the line of cashiers singing backup vocals, of course) -- jazz fingers and so on. But then I realized that every single person in that hovel of taco enticement could be dressed just as well. All it takes is a little effort and you, too, can "feel pretty." (Backup dancers not included.) Lots of money or even lots of time are not prerequisites to looking sharp. The best dressed people are the ones who make it look effortless and don't spend a fortune on every outfit.

I understand that sometimes ... many times, in fact ... it's comfier to throw on your nearest tank top and jeans and say "whatever" to the whole masquerade. But I truly believe that your exterior can highly affect your interior. For example, if your apartment or house is always cluttered, and you have problems clearing your mind, your outward clutter may very well be a personification of your psychological state. For that matter, if you're not particularly feeling that great about the weight of your debt, is dressing like your current mental state (i.e., stress) going to help you out of it? Of course not. Granted, simply dressing the part will not solve any debt problems, but it's one small step in becoming the smart, savvy money honey we all know you are. Besides, there's just something about wearing high heels that makes every woman's inner confidence stand out with every stride.

With that in mind, here's a fabulous outfit I pieced together, courtesy of Polyvore (which allows you to create "outfit collages" from different retail sites on the web). This is a very no muss, no fuss outfit that takes a second to throw on but makes you stand out from the crowd in a marvelous way, even when just running errands:



American Eagle sunglasses: $19.50
Target headband: $12.99
Debenhams.com handbag: $40
Old Navy dress: $34.50
Target pumps: $24.99
Claire's pearl earrings and necklace: $10 (total)

Not too shabby, huh? And of course the more expensive purchases, like the handbag and sunglasses, can be found cheaper if need be.

The next outfit idea is a great French look for drinks, dinner, or even just out to get coffee on a saturday night with friends:



Forever 21 dress: $27.80
American Eagle sunglasses: $12
Forever 21 neck scarf: $5
Forever 21 clutch and earrings: $12.99 and $4.99, respectively.
Gold-plated Etienne Aigner ring: $24
Sergio Rossi pumps: $200 (Expensive yes, but you can always find a good imitation pair for cheap.)
Newlook.com cardigan (optional): $18

Confession: I did buy this herringbone dress last week, and let me tell you, it's fabulous! For being so cheap, it's made remarkably well. I know what you're thinking: This is way too dressy to go out for coffee in, but there's a difference between too dressy and sharply polished. Are you wearing a ball gown to Starbucks? Didn't think so. That would be too dressy. This is sleek, sophisticated and poised.

The whole point is to mix and match your pieces to save money, so if you wanted to wear this dress during the day, match it with a shirt underneath to give it a conservative edge:



GoJane.com pumps: $22.99
Forever 21 necklace: $5.80
Forever 21 headband: $2.80
American Eagle sunglasses: $12.99
Target Isaac Mizrahi wrap trench coat: $22.49

As I said earlier, cheaper substitutes can be found for many of the accessory pieces.

Thoughts?

Thursday, August 28, 2008

Diamonds are (still) a girl's best friend

With all this talk of recessions, the subprime mess and the credit crisis, it seems that high-end jewelry still reigns supreme with consumer's checkbooks.

When you think luxury jewelry, Tiffany & Co. most likely comes to mind, right? Well, it does for me -- not only are they geniuses at marketing, they're a historical staple of American consumerism because of it, and, quite frankly, they just seem to know how to tug at my heart strings every time I see a new, robin's-egg-blue catalog in my mailbox. But I digress.

If you don't follow business news, one of the highlights on Thursday was the uptick in Tiffany's stock price, which rose 11% to $43.89 (the biggest increase since August 2005). Tiffany's is second in line globally behind the largest luxury-jewelry seller (that would be Geneva-based Cie. Financiere Richemont AG -- I know, I've never heard of it either), but the company's earnings still say oodles about current global spending habits within the retail milieu.

The jeweler's earnings nearly doubled to $732.4 million, while its profit (up to $80.8 million) and sales far exceeded analysts' estimates. Higher annual earnings were forecasted going forth. Phew! Apparently we really enjoy our baubles, bangles and beads, ladies!

But before you wonder why it seems like you're the only girl who suddenly can't afford Tiffany's jewelry, keep in mind that sales were stronger overseas as opposed to within the 50 states. The company said that total sales were "strong" in Europe (up 35%) and the Asia-Pacific (up 17%), while revenue dropped 4% at its U.S. stores open at least one year, as consumers cut back on discretionary spending on luxury goods in lieu of higher-priced food and gas. Tiffany's did say, though, that it expects its sluggish U.S. sales to climb in the upcoming and most important quarter of the year -- Christmas season! Guess the lyrics from "Santa, Baby" ("Come and trim my christmas tree/With some decorations bought at Tiffany's") really do ring true with women's holiday desires.

Regardless of the slight dip in U.S. sales, everyone was impressed with Tiffany's results in the current global economic environment. The U.S. isn't the only country with fiscal problems: Countries such as China, Argentina and Japan, are also facing problems. In fact, just today Japan unveiled an $18 billion stimulus package to help its unsettled economy. (The country still remains suprisingly challenging for Tiffany's, and does not play a part in the company's Asian-Pacific earnings success.)

"In a really tough economic environment, [Tiffany's] continuously manages to beat expectations,'' Pali Capital analyst Stacey Widlitz told Bloomberg Radio today. "Tiffany has become more of a global brand and its strength in Europe and Asia is really offsetting the U.S. weakness.''

What's ironic is that while Tiffany's was all glitz and gold on Thursday, Zales (which is a leading lower-end American jeweler) actually saw a large loss in its latest earnings. I call it ironic because wouldn't "cheaper" fare better in today's economy, where many are on the hunt for the best deal? Granted, I think Tiffany's quality is far superior than Zales, et al., but for many that quality comes with too high a price tag. I'm sure, though, that the reason Tiffany's is still doing relatively well domestically (a 4% drop isn't that bad) is because of the purchasing power of the upper-middle-class to rich demographic, who remain generally unaffected by the weak economy.

Many people, including my sister (this one's for you, kid!), think that business news is "boring," "dull," and "not that interesting," but it's marvelous how much you can learn about sentiment and the social aspects of our world by looking at the successes and failures of key companies. Tiffany's happens to be in the jewelry marketplace -- who's demand, according to an MSG Consultants jewelry retail report, "is largely determined by the disposable income of consumers."

The report also said that "the increasing amount of affluent individuals, working women, double-income households and fashion-concious men kept jewelry sales strong through 2005," right before the U.S. economy took a dive on the subprime mortgage debacle. Like I said earlier, Tiffany's stock price hadn't risen as much as it did Thursday since 2005.

So, by analyzing successes from such companies, you can begin to see a pattern in domestic and international spending habits within different demographics of people in specific salary brackets as they face certain weak economies. It's truly fascinating stuff, and is fabulous context for your individual ideas on personal finance and spending versus saving. And you thought business news was stuffy and boring!

Wednesday, August 27, 2008

Oh Forex, you saucy minx

Well, chickadees, it's been a while since we've gone back to the drawing board with the fundamental terms all of us should know and love, and we all know I'm a firm advocate of having a clear understanding of all options to peruse and park your money with. Think of it as parking your car. If you had a sporty convertible you recently spent your savings on, would you park it just anywhere? Of course not! At least I wouldn't. I'd try to find the parking space with the most air around it so my car can emerge unscathed from any nasty dings or scratches from neighboring vehicles (curse you, Costco parking lot!).

Well, the same sort of thinking should be applied your investments ... after all, your investments are your savings, parading around under the guise of a fancier name. Before you put dump your savings in that new convertible -- er, I mean investment -- you'll need to know what your options are. Do you like to take risks and man the steering wheel? Are you a backseat driver, only giving input when you see fit? Or do you tend to sit back and just enjoy the ride? Regardless of which type of investment is more your style, you have to exhaust the breadth of your knowledge on what's out there. After all, how would you know if you're making the right decision? You could end up screaming "Help!" out the moon roof of a speeding car you never should have started driving in the first place. Which leads us to the word du jour: Forex.

I'm sure many have heard of it, but few truly know what it is. It sounds complicated, so I don't blame you for feeling a little intimidated, but bear with me, it's as easy to understand as fresh strawberry pie (my favorite) .... with a light patina of strawberry glaze .... and perhaps a teensy dollop of whipped cream .... mmmm. Oops, lost in another dessert haze. Le sigh.

Forex is a complex-sounding word for exactly what it is: The foreign exchange market. Get it? FOReign EXchange ... Forex ... there you go. The foreign exchange market, or Forex, is the international exchange market, in which different currencies are exchanged (i.e., bought and sold, much like stocks).

So what's the difference between Forex, and say, the regular stock market, you ask? Simple! First off, buying and selling in Forex isn't consolidated on one hub, such as the Nasdaq or NYSE (New York Stock Exchange). Forex trading happens globally in almost every time zone, in a surfeit of locations all at once via telephone and Internet. Also unlike the stock market, where trading begins promptly at 9:30 a.m. until 4:00 p.m. during weekdays, Forex allows you to trade 24 hours a day from Sunday afternoon to the following Friday afternoon. Normal business hours? Pfff -- not with this saucy minx!

So how does it work? Well, the uber simple explanation is you speculate whether a country's currency will rise or fall, and buy or sell that currency accordingly to try to make a profit. After you've found a currency, like the euro, yen, or pound, that you think will take off (even in the super short term), you contact Forex dealers either by phone or Internet, and they then conduct your transaction for you.

Because Forex is set up this way, Forex traders (like moi, and all of you) essentially determine the price of individual currencies, based upon supply and demand for each. And you thought economics was boring!

Forex is fabulous because:

  • While you own a currency you're the recipient of its interest -- and the interest rates vary from country to country. Score!
  • It is the largest liquid financial market (if you're not clear on liquidity, click here), meaning that the daily trading volume is so large -- between $1 trillion and $1.5 trillion (yes, we're talking trillions here, ladies!) -- that it's nearly impossible for any one person or fund to affect the worth of a currency by placing one bet on the table for it. Also, because Forex is so liquid, it only takes mere seconds to buy and sell currency because there are always buyers and sellers ready and waiting to snap up currencies. This is much different than the stock market, where some purchases and sells can take hours due to a lack of willing buyers or sellers.

If you're wondering whether Forex is the right investment for you, Forex for Dummies makes a valid point: "Americans may not understand that by NOT investing in currency they actually lost 50% since 2002," -- due to the value of the U.S. dollar dropping -- "but they understand that gas is more expensive, along with many other imported products. Therefore an investment in Forex is not a traditional 'investment' with the hope of potential return, it is a hedge against inflation caused by your local currency fluctuations.

Investors who deal in Forex generally use two research methods to make their decisions (these methods, by the way, are also used in the regular stock market, so pay attention!):

  • Technical analysis, which is analyzing your potential investment based on, well, its technicals. This means believing that the current price of what you want to buy already reflects anyfactors in the market. If you're on the technical analysis boat, you generally look at the highest and lowest price of the currency you're analyzing, along with the daily volume (or amounts being bought and sold in the marketplace). By taking a historical look back at the numbers, patterns, and trends a currency or stock hasexhibited, you can make at least a short-term guess of how it will perform in the future.
  • Fundamental analysis. Unlike technical analysis, which is based on cold, hard numbers, fundamental analysis is based on the fundamentals of a country that could affect its currency, such as politics, rate of inflation, geopolitical tensions, etc. (This is why magazines such as The Economist are a great read for both news junkies and savvy money honeys alike!).
Unfortunately, it's not as easy as choosing one of the two aforementioned methods and jumping headfirst into Forex. Much of the gains and losses within the foreign exchange market (and stock market, for that matter) is based on people's predictions of how much or when a currency will rise. Therefore the value of any particular type of money can be largely tethered to investors' perceptions of what it should be worth. So, there's a little financial psychology to throw into the mix as well!

Keep in mind that Forex is extremely risky -- it's in no way comparable to investing in a mutual fund or CD, and even if you do know how to play the stock market right, it doesn't mean you'll make out like a bandit in Forex. But I guess that dangerous allure of risk and return is what makes this kind of investment a femme fatale in its own right.

Forex for Dummies does point out, though, that just because there's risk with Forex doesn't mean it should be an automatic "no" on your investment radar. "The stock market can crash, but the currency market cannot. If the Forex market for some reason collapsed, we would be back in the stone age, trading cows for gold, and banks would not exist. Unless you are willing to accept this abstract reality, you can be safe and sound knowing that the Forex market will never crash. Anyhow in a scenario like that, only investments in raw materials will be of value (sugar, coffee, alcohol, gasoline, tobacco)."

Then again, I believe that just because something can't crash doesn't mean it's the smartest vehicle for your money. That all varies, again, with what kind of driver -- I mean, trader -- you are. But do know that if you desire strong, positive results, Forex is a very research-intensive, hands-on means of getting there. If you can't commit the time and patience to teach yourself the subtleties of this complex and risky art, there are still a bevy of alternative investments you can choose to go with, but at least now you can be confident in your primary understanding of all things Forex! It wasn't that complicated after all, was it? Now, where's that slice of strawberry pie ...

Fashion on a Budget: The trench coat edition

"If the little black dress had an outerwear equivalent, it would be the trench coat," says RealSimple Magazine, "It's chic, functional and universally flattering."

I couldn't have said it better myself! What better way to follow up my last fashion on a budget post, than with the LBD equivalent in style and poise: the perfectly fitting trench coat. I confess, I'm a trench coat-aholic (I have 5!), and believe they are a distinct staple that can jazz up even the blandest of wardrobes. The trick is finding a trench coat that 1.) fits well and 2.) is made from fabric you can deal with (i.e., you don't want to sweat inside your coat on a rainy day because the cheap fabric doesn't allow your skin to breathe). For us gals on a budget, the hardest part of finding a good, cheap trench coat is that usually the more expensive coats are, well, more expensive because they have more impeccable tailoring and use higher quality fabrics than their cheaper counterparts. Unfortunately, though, we can't all buy Burberry (but, boy would it be nice if we could!). To compensate, it takes a lot of digging to find lower-priced alternatives, but I think I've found a couple fabulous yet cheap options!


Adorable, huh? This trench (pictured at left) just debuted at Target from the "Richard Chai for Target" line. I think it's so cute just as pictured, but it would also look great with slacks and/or dark, sleek-fitting jeans and pumps. The jacket (which retails for $44.99) is fully lined, double-breasted and comes equipped with a purple/ebony hue, so it's perfect for Fall (with purple being the it color next season). Fifty bucks is a divine deal for a chic trench, but if it's still too pricey, you could wait till it goes on clearance, as most clothes do at Target, and pray they still have your size once the price drops. To really make your outfit pop, pair it with a pair of these pumps pictured below, also at Target and on clearance for $11.49!!! Snag them soon, though, because sizes may be dwindling. Together, that's an entire outfit for $56.48. Okay, maybe not an entire outfit, but no one needs to know if and what you're wearing under said trench coat.

If patterns don't quite float your boat, you could go with a standard black trench -- very hip, very chic, very Angelina Jolie. I found a black London Fog trench (below) with removable wool liner for $89.99 (originally $200) at BurlingtonCoatFactory.com. This is pricier, but I think the cut is superb. Again, pair this with a pair of pointy heels in black to finish off the polished look and feel like a Bond girl.

Does something still seem like it's missing? It is if you noticed the dearth of khaki trench coats within this post. I have yet to find an amazing deal on a fabulous khaki trench, although I did recently buy a marvelous Michael Kors one at Nordstrom Rack for over $100, which may be too pricey for you savvy savers. For the winter months, I also bought a sophisticated wool Kenneth Cole trench for about $170 last year. Kind of pricey, but I LOVE it! Have any of you found cheap yet adorable trench coats, especially of the khaki variety?

Tuesday, August 26, 2008

"I'm ready for my close-up, Mr. DeMille"


Justine over at Justine's Living Lean recently nominated me for the nifty blog award pictured above. Thanks so much, Justine, and to everyone else who reads! Without you my written words would just be ink on paper ... er, you know what I mean. In the great words of Sally Field, "You like me! You really, really like me!" With that, here's some other blogs I "really, really like" ...

Sunday, August 24, 2008

Does money buy happiness? In short, yes

There's some questions that never fail to inspire heated discussion as they pass down through the ages. Does money buy happiness? What is the meaning of life? Why does Sinead O'Connor own a blow dryer? (Name that reference!) We may never know the answers to the latter two inquiries, but the first always elicits one of two responses: either a "yes" or "no." It seems like many are on the "no" boat, especially those of us who don't have a lot of money to begin with. It's as if by answering "no," we somehow feel emotionally richer, and above someone who would even think to answer "yes." There's solace in at least feeling "rich" in that way.

But the problem with the "no" response is that it's usually anchored to some strange belief that happiness can be found in the material possessions in our lives. Why have we been so conditioned to believe that a new car, a Gucci handbag, or 62-inch flat screen TV will somehow magically make us happier? Or, for that matter, when did we begin attributing inherent "happiness" to the more expensive, out-of-reach items in the marketplace? Is it simply because we can't have them, or is it that we covet the distraction that comes with them? One of my best friends believes that money doesn't buy happiness, but it buys distraction. According to him, "you can distract yourself from your unhappiness with 'toys' that keep you numb. Happiness is internal, not external."

But when I'm asked this ever-pervading question within the finance world, I respond with a confident "yes!" I do believe money buys happiness, but happiness to me is not the material possessions in my life, it's the time my money buys (also known as my personal freedom). For example, take one of my favorite hobbies: traveling. Happiness is not the airplane ticket itself, it's the days, weeks, or months my money affords me to use traveling in the first place.

Happiness in a handbag, for instance, is fleeting ... it's a distraction that doesn't sustain itself. Sure, it's fun and exciting to buy nice things for yourself, but I would say that the happiness people affix to these and other big purchases, such as Porsches and iPhones, isn't so much happiness as it is the distracting excitement of attaining something elite and exclusive. Better known as the "rush," this feeling quickly subsides the longer you've owned the item.

A recent article I read in the September 2008 issue of SmartMoney (the financial magazine owned by The Wall Street Journal) reaffirmed my belief that money does buy happiness. According to the magazine, "the rich really are different." Harrison Group vice chairman Jim Taylor said "there's no group in America that's happier than the wealthy," and, said the magazine, about 70% of millionaires say that money has "created" more happiness for them. A new Wharton School of Business study quoted that a higher income correlates with higher ratings in life satisfaction. But, the magazine said, "it's not necessarily the Bentley or Manolo Blahniks that lead to bliss."

"It's the freedom that money buys," said one coauthor of the study, which also found that rates of depression are lower among the wealthy. And, Rand Corporation senior labor economist James Smith also said that the rich tend to be healthier than the rest of the population -- health and happiness, he said, are as closely correlated as wealth and happiness.

With that said, there are many wealthy people who have many fun toys, but is it the toys that bring them happiness, or is it the time they've earned to play with said toys? To answer the over-arching question, you have to ask yourself what happiness means to you. Is it lavish wardrobes, the newest iPod, or anything else you can hand over your credit card for? Or is it spending your time and life the way you see fit, i.e., hanging out with your family, traveling, and perhaps listening to music via your wonderful iPod?

I'd love to own as many shoes as Imelda Marcos, but what's the point of owning excessive amounts of footwear if I never have the time to enjoy them, especially with the people I care about?

Do you think money buys happiness? More specifically, what is happiness to you?

Thursday, August 21, 2008

Fashion on a Budget: The little black dress

Ciao, dahlings! I've decided to mix things up a little on this blog, since many of you not only want to learn the merits of saving and investing, you want to look fabulous while doing it, too! I spend quite a bit of time trolling the Internet for the best fashion I can find for my money, so every once in a while, I'm going to post simply divine deals I've found online that I think all savvy and stylish ladies on a budget simply must own.

I love designer pieces just as much as the next girl, but because my primary goal is to save rather than spend, part of the fun of shopping for me is finding the pieces that most closely resemble the ridiculously priced originals. Be it sunglasses or shoes, dresses or jackets, there is always a darn good imitation lurking somewhere in your nearest H&M, Forever 21, etc. that you can wear for a fraction of the cost. (If you can't get enough of fashion at a great price, check out one of my favorite frugal fashion blogs: Frugal Fashionista.)
Again, just because you're saving doesn't mean you can't look stylish! So, without further ado, what better place to start than with the Little Black Dress (or LBD, for all you girls in the know)? As I (hope) you all know, the LBD is a staple in any wardrobe ... especially when you can snag a tres chic one for only $20!

I recently found a fabulous strapless, knee-length LBD at Forever21.com (pictured above), price: $19.80. Its structure and cut is perfect for almost any body type! If black isn't really your thing, they also have it in a deep plum, which is the IT color (for the second year in a row) for Fall. Pair it with a cute pair of open-toe pumps, a clutch, gold hammered-hoop earrings (I just bought a pair by Ralph Lauren for $20 at Nordstroms!), and cardigan (if strapless isn't your thing, either). The possibilities are endless. In fact, at this price, I think I'm going to order it right now in both colors! Thoughts? Have you spotted any other cute, cheap LBDs recently?

Wednesday, August 20, 2008

What snacks really cost

It's 3:45 p.m. on a Tuesday. You glance gingerly at the clock at work, wondering why the day is dragging on, and decide it's time for your daily Mountain Dew and Twinkie, compliments of your company's vending machines. It's a good reason to step away from your desk and stretch your legs -- you've already finished most of your work in the morning, after all. Plus, you've always been one to snack here and there whenever you get a little bored. You scrounge for some change at the bottom of your purse and strut over to the vending machine. Now that you think about it, though, this is becoming somewhat of a daily habit ... and you are trying to save money. You turn away to trek back to your desk, but you're not even an arm's length away from the snack machine before you think "It's only a buck and some change ... it's really not that big of a deal if I just bought something today."

Unfortunately, my dear, that kind of thinking wastes more than just change on a monthly or even yearly basis. There's nothing wrong with snacking here and there at work, but those nickels, dimes and dollars really do add up over time if the vending machine is a usual stop at least once throughout your work day. Luckily my company keeps a stocked fridge in our kitchen area, so drinks and snacks (like hummus, pretzels and bananas) are always free for my co-workers and I. But what about for those of you who aren't provided such amenities? At my last job (I was an editor at a Bay Area newspaper), the snack room was vending machine city and nothing was free. If any of us in the newsroom were too lazy to make coffee (that we'd buy and bring in), we'd just buy coffee for some change at the snack machine, or make a quick Peet's Coffee run. Looking back on it now, I was a fool to fritter away so much of my cash on snacks just because it was an impulsively convenient thing to do. Don't believe me? Check out how the numbers speak for themselves.

Say you worked five days a week, and bought a packaged cookie ($0.65) and can of soda ($0.75) every day for a daily total of $1.40, which isn't bad at all. Yearly, though? It becomes a $364 annual habit! And that's for the cheap stuff. If you want to munch on the more expensive toodies on a daily basis, say a bag of Doritos ($1.25) and a bottle of soda ($1.25), that comes out to $650 per year!! And that money doesn't even include eating out for lunch, which even the staunchest brown bagger ends up doing sporadically. So what's the solution? Well, you could either go cold turkey and not snack at all, but let's face it, that's probably not realistically going to happen. Or you could (obviously) bring your own snacks to work. Yes, the latter will still cost you some money, but if you grocery shop smartly (which is a whole other article unto itself), you typically end up saving a lot in the long run. For snacks, I like to buy fruit in bulk from Costco, where it is downright cheap compared to other stores such as Safeway. I swear by Trader Joes for everything else (their dried mango strips are simply divine!).

Anyway my point is to stir up some awareness of how much we typically spend on something as frivolous as a vending machine snack, just because a.) we've got some extra change, b.) we're bored, c.) we're a little hungry, d.) we were lazy about planning ahead and bringing food from home, or e.) it's there, so why not?

The more we're aware of our purchases, the more us ladies on a budget can save and invest for the bigger things in our life. Maybe an early retirement replete with a cute, red vintage Alfa Romeo? I'd take that over a bag of Funions and a Coke anyday!

Tuesday, August 19, 2008

They win a lawsuit, we win free makeup!

Being married to a future litigator (okay, technically he's still a law student), I catch wind of many happenings in the legal sphere. Much of it is fascinating, a teensy bit of it is dull, and once in a while there will be the truly fabulous gems that stand out! And so, chickadees, I thought it be only apropos that I share some great news! Don't worry, I'm not about to lose you in a legal diatribe, but how does free makeup at Nordstroms, Macy's or Lord & Taylor sound?

As you all know, those big-name deparment stores and more (including Bloomingdales, Neiman Marcus, et. al.) always charge the same price for every kind of cosmetic, right? Clinique and M.A.C. products, for example, never go on sale, and usually in-store coupons never comply with the cosmetic counter. Well apparently that's called price fixing and apparently it's highly illegal! How so? The suit alleges that shoppers (meaning moi, and all of you) were cheated by the big, bad retailers (along with specific makeup brands, such as Chanel, Prescriptives, Clinique, etc.) who all made a pact (i.e. price fixed) that the stores would only sell makeup at the retail price suggested by the brands. That's why, as I mentioned a second ago, no coupons or discounts ever applied to the long-coveted YSL lip gloss you had your eye on at Nordstroms or to the Dior makeup you wanted at Macy's. Well as it so happens, price fixing is a volation of anti-trust laws! You learn something new everyday, no?

The suit started back in 2004, so it's all old news, but a verdict finally came to fruition recently: Beginning in 2009, the retailers and brands involved in the whole debacle will have to give away $175 million worth of makeup to consumers who were taken advantage of (along with paying $24 million in attorney fees).

The metaphorical gauntlet has finally been thrown down and (obviously) no more price fixing will happen at these stores or with these brands.

I know what you're all thinking: Point me to the free makeup! One caveat is that each consumer only gets $25 back in cosmetics, but that's $25 in powdered bronzer that I'm fully entitled to! Although it's not 2009 yet, start bandaging those vulnerable "I-paid-way-too-much-for-Chanel-lipstick" scars by taking proactive steps to earn back what's rightfully yours.

To be eligible for the money, you must "currently be a resident of the United States who purchased department store cosmetics in the United States between May 29, 1994 through July 16, 2003."

For a list of which stores are involved in the suit, and how you can redeem your $25, visit the official lawsuit website at http://www.cosmeticssettlement.com/ .

Guess it really does pay to be in the know, huh?

Sunday, August 17, 2008

School Loans: Private vs. Federal

I was reading the latest issue of BusinessWeek the other day (for all you Office fans, Dwight Schrute was on the cover!), and I came across an article called "Getting Smarter on School Loans."

Now, we've heard it all before: faster, easier "tricks" to paying off student loans. I, too, am guilty; even I recently wrote about it. But what caught my eye about this approach was that the article analyzed the type of loan being considered, versus how to pay it off after the fact ... bringing us to the ultimate crossroads: private student loans versus federal ones.

Many of you might think this one is a no-brainer -- of course, federal student loans would make more sense, right? Yes, but you wouldn't know it delving into the recent credit habits of the college bound and/or their educationally encouraging parents. According to the recent BusinessWeek survey quoted, college students and the like have fallen back on a thick padding of credit cards, home equity and private loans to pay for school. So what's the big deal, you ask?

First off, this is exactly the kind of thinking (or spending, if you will) that got us into the credit crunch and subprime mess we're currently in. In fact, earlier this month Wachovia joined a list of more than 150 other banks who do not offer student loans anymore, according to the article. It may seem like private student loans may also, like the antiquated times of the Old South pre-Civil War, be gone with the wind. The good news is this might be one of the best things to happen to many students and parents who need financial ushering when it comes to making the best decisions.
"In a weird way, the credit crunch may be an important wake-up call for some families who had been financing tuition costs in irrational and expensive ways during the era of easy money and rapidly rising home prices. The growing skittishness of lenders force more borrowers to exhaust their federal options, a growing pool of funds that typically have lower interest rates and more favorable terms."
Or so the article states. Don't believe it? Just take a look at the numbers (courtesy of the magazine):
  • Fixed rates on federal student loans usually fall between 6.8% to 8%, versus adjustable private loan rates of between 8% to 20%. (For comparison purposes, the average interest rate on a credit card is 13%.)
With numbers (generally) that disparate, some may wonder why there's even a comparison. But although the choice might be obvious to many, the story states that convenience plays a bigger factor in finding a loan or amassing debt versus saving by finding the cheapest interest rate. BusinessWeek dubs this phenomenon "The Cost of Convenience."

Even though 77% of students and 36% of parents sign up with federal student loans, both parties tend to fall back on other sources to "supplement" that money, says an impending Sallie Mae survey, which also points out that:
  • 19% of parents who borrowed federal money for student loans ended up charging tuition on a credit card.
  • 20% of parents who signed up for federal loans used home-equity loans to pay down tuition (an average $10,854).
  • More than 25% of students who used credit cards "did so out of convenience."
According to education firm College Board, private loans have grown 27% each year between 2001 and 2007, versus 7% per year for federal loans. Why the huge disparity? Simple! It all comes down to that cunning little thing called "convenience."

Private lenders usually make the sign up process extraordinarily easy for those with their palms out. In many cases, the article says, consumers only need to a phone call or fill out a basic online form to gain access to tons of money (and, unfortunately, interest-laden debt). In some cases, financial aid officers were herding confused parents to the offices of private loan firms. The whole matter was investigated by the N.Y. Attorney General in 2007, who found that aid officers at certain large universities were receiving "kickbacks" from private lenders, who reaped the benefits of getting clueless students and parents to sign up with them.

Now compare the simple private-loan process to the complicated federal one, which consists of the FAFSA, an over 100-question long survey that includes uber-private questions about family earnings and financial history. Couple that with the stacks of tax and other financial documentation needed to supplement the FAFSA, and you can see why any stressed out college student or parents of a college student would rather take the easy way out. According to the Sallie Mae poll in BusinessWeek, 25% of people borrowing money didn't even bother filling out the FAFSA.

The good news is that with private lenders retreating, Congress has recently expanded the limits on Stafford loans (the primary type of government school loan that's available regardless of family income or credit history). Students now get an extra $2,000 per year with the Stafford.

And there may still be light at the end of the tunnel in that some colleges, such as Barnard, now require families to speak to a financial aid counselor before enrollment in the school is certified -- which is needed before you can even sign up for a student loan. Since Barnard's program has started, say the article, its volume of private loans has dropped to $435,000 from $1.5 million.

Barnard's director of financial aid characterized private loans perfectly: "[They] are like well priced credit card[s]."

So what does this all mean to you? Whatever phase of life you're in (i.e., with or without kids, looking into going back to school, about to graduate high school,etc.), it's always important to know exactly what you're getting into when you sign your John Hancock to the bottom of that loan contract. Exhaust all of your options and make sure your decision is right for you, and not just right for the guy trying to sell it to you. After all, the backbone of your life is your money, and the decisions you make with it can determine your lifestyle for years to come!

Thursday, August 14, 2008

Learn the lingo: Money Market Accounts

When people get together to chat about CDs (all right, maybe they aren't the ultimate topic of conversation, but we'll pretend they are), what usually peppers the same discussion is the ever-elusive "money market account." From there, people tend to take opposite sides of which investment vehicle is the best, pointing out the pros and cons of each, which is more affordable to start with, etc.

If you're new to the game and don't like asking what you perceive as "stupid" questions, it's at this point in the what-seems-like riveting discussion that you retreat, appletini in hand, and quietly listen like a ladybug on the wall. Perhaps you don't know what a CD is (if not, check out my earlier post on the gem). Perhaps you also don't know what the money market is (for many, visions of a market made of money come to mind). To get more engaged in your friends' financial tete-a-tete, though, and further your own investment knowledge on the matter -- after all, that's probably why you're reading this -- it's time to get back to the basics!

First off, the money market and money market accounts are two separate things. The money market is a unified name for the myriad of ways that banks, companies, governments, etc. borrow and lend money. Those different ways include taking the shape of: 
  • Treasury bills 
  • short-term certificates of deposit 
  • short-term municipal bonds 
  • government securities (such as those issued by Freddie Mac and Fannie Mae) 
  • money market accounts 
Still fuzzy on the whole phenomenon? Think of it as the stock market (where stocks are bought and sold), but instead it's money that's bought and sold, and for shorter periods of time (never over a year). 

Of course, the whole point in investing in the money market with your cash versus leaving it in a savings account is that by loaning the bank or government your money, they are paying you back high interest for doing them a favor. In other words, you'll be earning more back on your money, which makes it a better investment because of the higher, yet lower-risk return on it (compared with the high-risk, high-yield returns you can get from investing in, say, the stock market). Interest rates can fluctuate with almost any investment, but they only tend to really hurt your money with wide rises and falls, which happen over years. One of the bonuses with a money market investment is that since it's such a short-term thing (again, about one year), in a sense it shelters your money from wide swings in interest rates. Simple, no?

Now that you're an ace in money market lingo, you'll need to know the different between a money market account and a money market fund! A money market account is very much like a CD, except it has the perks of a checking account (i.e., you can write checks with said money and withdraw it more freely without any CD-like penalty). Unlike a checking account, though, a money market account comes equipped with a higher interest rate (score!!). They are good savings vehicles for ladies on a budget who want the ease and simplicity of strutting into a bank and opening an account, and who may also need instant access to money and therefore might not want to pay the penalty to withdraw cash asap. 

One caveat to remember is that even though you can access your money more freely through a money market account, there are still restrictions in terms of how many times you withdraw per month, or how many checks you write, but typically it's about 3 to 6 times monthly, which I don't think is at all that bad. Anything more and it might be time to reevaluate if you should be saving in a money market account at all! 

Also, many banks require you keep a minimum balance in your money market account (usually $1,000 to $2,500), so make sure you understand your individual bank's requirements about minimums, frequencies of withdrawal, etc. And last but not least, unlike interest rates in a CD (that directly correlate to maturity), interest rates in money market accounts are proportional to how much you have in your account, versus how long you keep it in the account. Translation: The lower the balance in your money market account, the less interest you earn from the bank, and the less it benefits you in the long run. By the that same token, the more you keep in the account, the wealthier your investment leaves you.  

A money market fund is a type of mutual fund where once your cash is invested, money managers reinvest it in the aforementioned savings vehicles of Treasury bills, municipal bonds and the like. The initial investment in a money market fund is higher than what might put into a savings account (think at least $1,000), but again, the interest you earn on your money is higher. Like money market accounts, cash can be pulled from these funds the instant you need them, but usually come with high minimums of around $500 (depending on where you invest), so constantly withdrawing money might not make it the best investment. 

When looking into investing in money market accounts or funds, be armed and ready with a checklist of questions for the bank, including: 
  • What's the minimum deposit to partake in one?
  • How much of a minimum balance do you need to sustain in the account?
  • How many times can you access your money on a monthly basis, and what are the limits like on writing checks?
  • What do the general interest rates over a 3-month, 6-month or 12-month period look like on the money you plan to deposit?
  • What kind of penalties come with the account?
Then ask yourself these questions:
  • Are the penalties something you could or would be willing to pay if you had to?
  • How much are you planning to invest in the account? How does this measure up with the minimum?
  • Do you think you'll need to incessantly draw money out to cover for bills or other payments, or do you see it as more of a "put it away and forget about it" investment? After all, the more you put in and less you withdraw, the higher interest you end up earning.
Now with all of that said, chickadees, do you feel armed and ready to discuss the merits of money markets, accounts and funds in your next financial pow-wow with friends? Even better, do you feel like a money market account is the right investment for you money? Don't forget to ask yourself and your bank the above questions when figuring out what's right for you. Happy investing!

Wednesday, August 13, 2008

The cheap $4.29 manicure

Perhaps I'm a little late to the game, but I think I've stumbled upon something truly marvelous that I thought I'd share! A couple months ago I was perusing the beauty aisle at the drug store, when I decided spur of the moment that I craved a do-it-yourself french manicure.

All of a sudden, visions of home-manicure kits gone wrong stumbled in
to my memory. Spots of white polish dribbling past sticky tape pasted on my nails as "guides." Crooked lines of what should have been perfectly painted white tips. The endless amount of dollars I had spent through the years trying in vain to find the best manicure I could give myself minus the extra cost of going to a salon. Much to my dismay, it was all snake oil. I even remember one time when I bought a white manicure "pencil," but that, too, failed to give me any semblance of the perfectly polished, just-stepped-out-of-a-nail-salon result I was looking for.

That is, until two months ago, when I found myself aimlessly strolling down the beauty aisle that is this post's scene at hand and spotted the Sally Hansen French Manicure White Tip Pen (pictured above), cost: a mere $4.29.

Let me just say, this pen works marvels!! Through all those years of trying to strike home-manicure gold, when I wondered why no one just invented a pen (instead of bottle) of white nail polish to touch up tips, I can finally now say "Eureka!" Not only can I give myself a damn good five-minute manicure, but I always keep it in my purse in case any flecks or chips occur. Case in point: I often accidentally chip my nail polish when I'm at work editing all day on my computer, and before there was nothing I could really do about it. Okay, there was one thing I could do. I tended to spend the rest of the day idly chipping the rest of my polish off during meetings and the like, but now with the pen, I can touch any single chip up right away at my desk. How's that for work efficiency and beauty upkeep?

Each pen gives you about 50 manicures, which isn't too shabby at all. Of course, you need a clear bottom and topcoat, too, but those are only about a couple bucks each. The real magic is in the pen. And don't get me wrong: I love getting my nails done at a salon. But the routine upkeep it takes to keep going back can cost more than you think. A standard french manicure here in DC costs about $20. If you go in about every three weeks to have it redone and made to look immaculate, that's about 17 manicures per year, or about $340 annually! With the pen, you get more than double the amount of manicures for $4.29! From what I've found, the pen is sold at almost any drug store in the United States (and I'm sure overseas). If not, you can always order online.

For all you drugstore cowgirls out there, remember that just because you're on a budget doesn't mean you have to forego looking polished. Even if you're in the doldrums of debt, succumbing to feeling like a doldrum (wait, is that even possible?), sweat pants and uncoiffed hair won't pull you out of your current plight. Encourage yourself with the confidence it takes to save and pay down debts by looking the part of the confident financier. Trust me, it does marvelous things for your psyche. Although I may live in my stilettos daily, I can understand if on-the-mark, day-to-day upkeep may not be every woman's bag. But remember that if you find cost-cutting ways to take pride in your appearance, it more often than not will give you the confidence you need to tackle the big problems in your life (ahem, debt) and truly become financially savvy. What better place to start than with perfectly polished nails at a fabulous bargain? (Gives hair flick.)

Come to think of it, I'm off to do mine now!

Do you have any bargain beauty tips you want to share? We'd all love to hear!

Tuesday, August 12, 2008

How much is enough to save?

Before I go further on this, I want to stress that to start saving you have to pay down your debts. No exceptions. With a growing balance in your emergency fund or savings account, you may feel like you’re coming out ahead, but that number means nothing if you’re taking your time to pay off interest-saddled debt. The longer you take to pay off your debt, the more money it will cost you in the long run and the less you truly end up saving. Simple! I’ve said that before but I felt I had to rinse and repeat. Debt (mostly credit cards) = bad, pay off ASAP. Saving = fabulous, do so when you’ve paid off (at least a large portion of) your debt.

With that aside, how much is enough when you’re saving? The real answer to that question is what, specifically, are you saving for? I, for example, am saving for a house, but in the more long-term, an early retirement. So how much is enough? “They” say that 10% is a good rule of thumb. Unfortunately after extensive research, I still can’t figure out who “they” are, but I guess “their” ominous title affords them some sort of credibility, especially since the Wall Street Journal backs that benchmark.

Personally I don’t think 10% is enough to retire on, especially if you want to retire in style. I’m not saying I need my own private jet, but my dream after I retire is to travel wherever I want, whenever I want -- to the distant lands of India, to the mountains of Argentina, to the vineyards of Tuscany -- and I want to save enough to make that dream a reality. I have a creeping feeling that the 10% benchmark was created decades ago, but with people living longer these days and assuming higher health-care costs, I think the benchmark is a tad low. At the same time, I completely understand that saving is not an easy thing, even 10% for many is literally impossible with the constant barrage of bills, loans to pay off, rising food and gas costs, etc. etc. But, alas, no one said this was going to be easy!

To give you an idea of how much we’ve descended as savers, according to Newsweek, the average American household owes 20% more in debt than it makes each year. Statistics from the Bureau of Economic Analysis (BEA) in February showed that Americans are only saving 0.3%, or $0.30(!) out of every $100 they earn. For a historical look at how us savers have stacked up in the past, just take a look at the average national saving rate for the following years (all courtesy of the BEA):
  • 1944: 26.1%
  • 1964: 8.8%
  • 1984: 10.8%
  • 1992: 7.7% (and from here it's been a spectacular drop into the red)
  • 1993: 5.8%
  • 1999: 2.4%
  • 2003: 1.4%
  • 2005: 0.5%
Oh how the mighty fall. It’s all so bleak, it could almost be lifted from the pages of a Dickens’ novel! Granted, we are in the midst of a subprime mess and downright dreary credit crunch, but how did we get to the point of where our current national savings average is on par with what it was during the Great Depression? My theory is that all too often, many of us fall back on credit and end up unable to climb out of the hole once we're sucked in. Once that happens, well, say aurevoir to saving anything. As I mentioned earlier, it's impossible to save if you're consistently deep in debt. And if you can't save, then how will you live lavishly post-career or achieve any other sort of financial goal, such as buying a house? (Hint: The larger the down payment you save, the less you will end up owing in interest on your mortgage, and therefore, the less debt you will incur.)

After you’ve tampered down your debt, consciously be aware of where your money is going. Do you give in easily to retail temptations? Or is your vision of your future house, college degree, or remodeled kitchen more of a palpable soufflĂ© for your mind? Think of things in terms of consumer-oriented items versus income-generating ones.

But I digress. Going back to the 10% cliche, consider this: People are living longer than ever. With living longer comes more health-care costs, more time to enjoy recreational hobbies (such as traveling, etc.), and more funds that will need to supplement your lifestyle for the long haul. Will there be dependents in your future (aging family members, children, etc.) who you will also need to remember when you do your weekly grocery shopping trip or pay the monthly heating bill? Add to that the fact that social security may not be the spoonful of sugar it was intended to be for many of us when we'll be ready to receive it, and you'll quickly see why saving -- more than just 10% -- is so imperative.

Ask yourself other questions also, such as do you plan to work a 9-to-5 salary job for the rest of your career? Or did you want more flexibility throughout your life, such as to freelance, or work on commission? These are factors that will not only affect whether you're able to pay your mortgage and grocery bills, but also how much you'll be able to save at that time in your life.

If your standard of living is exactly the way you like it (or near close to it!), would that same lifestyle translate well into a future you didn't really plan and save for? If wine tasting, for example, is your passion right now, have you considered whether you could still foot the bill for such a passion if you retire early?

As kids, we used to say what we wanted to be when we grew up with revered certainty that it would happen. Some wanted to be astronauts, some actresses. At one point (I was 5), I said I wanted to be a smurf. Well those same musings often trickle into our more adult, financial lives in the forms of "I'll retire when I'm 50" or "Once I save a million bucks, I'll retire." You get the picture. But behind many of these all-too-often-used adages, there lacks a real budget or financial plan to achieve said goal, much like I lacked a plan to become a smurf.

I've written before that another benchmark people like to throw out there for saving for retirement is the good ole 70% of your "pre-retirement income" benchmark. Are you sure that 70% of your pre-retirement income will be enough to have you basking on the beaches of Turks and Caicos? Or if fancy cars are your thing, will you ever get to toodle around town in that vintage '67 Porsche (a la Robert Redford) you always wanted on 70% of your pre-retirement income?

As I've mentioned a handful of times already, beginning your savings nest egg at a younger age truly benefits you. The younger you start, the more time your money has to grow. According to a 2005 article in U.S. News & World Report, people who start "saving in their 20s should save 10% to 15% of their gross income for their entire working life." If you wait to start saving until your 30s, then that number increases to 15% to 25% of your annual salary. Wait until your 40s, and you'll need to save 25% to 25%, and so on. Why? Because the older wait to start saving, the more you'll have to save to make up for all the time you lost when you were spending it.

Lastly, ask yourself this: How much do you currently earn, and how much do you figure you'll need every year (including the banal barrage of bills, etc.) to sustain a comfortable retired life?

Which brings me back to the original question: How much is enough? Unfortunately, there is no tidy "10%"-type answer. It all depends on the individual variables in your life, and your responses to the aforementioned questions.

Begin thinking about your answers to these and many other self-reflective questions you may come across and calculate approximately how much you think you'll need to start saving now to be able achieve your goals. If that's not "tidy" enough to assuage your current financial stress over your future, try using CNN's "What You Need to Save" calculator, a fun and quick way to see how much you'll need to save up annually if you want to retire at 65 with 80% of your pre-retirement income.

Friday, August 8, 2008

The perks (and downfalls) of retail credit cards

'Tis the season to shop ... wait, isn't that every season? And with shopping comes the most-asked question by sales clerks and store merchants alike: "Would you like to put this on your _____ card?" (Fill in the blank with Bloomingdales, The Gap, Banana Republic, Macy's, Nordstroms, Target, or any other store you happen to be frequenting at that very moment.) Oh, there's also the addendum to this commonly asked question, the one I like to call the make-it-seem-like-you're-getting-a-great-deal-on-your-purchase inquiry after you answer "no" to the first question: "Would you like to save 10% by opening an account?

Now I get that a lot of the sales associates or cashiers that help me don't want to ask these questions. Many times they ask with the enthusiasm of someone who's just found out they need to get another cavity filled, so I understand that it's all part of the job requirement (hey, I worked enough retail in high school and college to know the ins and outs.) But it's the premise of the situation that irks me to no end. If I wanted a retail credit card, I would ask to sign up for one! Not that that there's anything inherently wrong with these cards. In fact, if you do a lot of shopping at a place such as Target, and you normally use Visas or Mastercards to fall back on for purchases (tsk, tsk, read this for why that's not the greatest idea!), then you may as well sign up for a store-issued card, right?

Consider this: You're click-clacking around your local Macy's in your new heels and outfit, looking for a necklace that would complete your look. You spot a tres cute Givenchy crystal necklace, price tag: $80. Now what you'd love to do is pay with your debit card, but it's near the end of the month when bills are starting to add up and, frankly, you don't want to risk cutting into the cash cushion you have in your account. You try walking away. You even get as far as the perfume counter, but something keeps pulling you back. You spritz yourself idly with the latest perfume, and eye the sparkle of the necklace under its spotlight across the department store floor. In the span of 25 minutes, you've already thought of other "perfect" outfits that would go with your impending purchase. Having no cash is not an excuse, and you can't fight it any longer. Yes, you may have only layed eyes on it 30 minutes ago, but you already know that you must have the Givenchy necklace. You're only option is a credit card.

In true choose-your-own-adventure form, you have two choices: you could charge said necklace to your Mastercard (through Capital One, for example), which comes replete with a $39 annual fee and an 8.65% APR, or -- at the urging of the pushy saleswoman -- you could open a Macy's credit card, which saves you an extra 15% on your necklace, comes with no annual fee, but is saddled with a breathtaking 22.9% APR. So what should the shopper on a budget do at this juncture of her journey (besides put the necklace down and come back when she has the cash)?

With the Mastercard, the interest rate would cost you another $7 on top of the $80 price tag. There is an annual fee with this one, but I'm assuming you're putting more on your card for the year than just a necklace, and so, the annual fee isn't too bothersome in this instance. There are many Visas and Mastercards that also come with no annual fees.

The Macy's credit card is more enticing though, with the scent of the 15% off deal wafting upward from the open credit application, beckoning you to sign your name on the dotted line ... but wait! Fifteen percent off of $80 is $68, so saving $12 is great until that 22.9% APR pops that $68 price up to $83.57. Yes, that's right. You'd be spending an extra $3.57 on the necklace, so really, how much of a deal is it?

There's a small number of you who may pay back your Macy's card in full at the end of the month, evading any sort of nasty APR and therefore utilizing the 15% off the way it was intended to be used. But let's get serious, if you're charging various things, the chances of you paying back your balance in full every month is probably slim. And if you're a teensy bit late one month with paying your bill, Macy's charges you a higher APR of 24.9%. Stop gawking, you read that right!

So with a significantly higher APR as just mentioned, what are the perks to carrying retail credit cards? Well for starters, they are one of the easiest kinds of credit cards to get, meaning that if you want to build your credit, you shouldn't really have a problem opening one. In fact, according to FinanceGlobe.com, you need "fair credit" to qualify for a Macy's card. I don't know whether to be amused or scared that it's that easy for unsuspecting people (who probably have "fair" bill-paying habits to begin with) to get lured into falling into a deeper credit spiral.

Another plus with retail cards is that many have adopted "reward" systems, where you if you spend a certain amount of money, you get a $50 gift certficate, for example, or with every dollar you spend, you get $0.05 back in the form of a gift card at the end of the year. You get the picture. (Love and I have a Nordstrom's Visa card and with every certain amount of dollars we spend, we get $20 gift certificates in the mail to use in-store or online.) At the same time, though, many regular Visa and Mastercards offer similar reward programs, with airlines miles and the like, so this isn't as much of a specific perk as it is keeping up with competition. Sometimes stores have special discounts, such as an extra 10% off, if you charge your purchase to your card, but this yet again introduces the problem of that horrible 20+% APR they conveniently don't remind you about.

The Achille's heel of signing your soul away to the nearest Banana Republic is what I've been discussing this whole time: the humongously inflated APR rates. 22.9%. Really? As a budding financier, you know better than to even get near such a thing. As I mentioned, the fabulous discounts you may initially get don't matter if you can't pay your balance off on time every month; the finance charges are sure to drown out any semblance of a good deal over the long term.

Also be careful of opening too many cards, regardless of how enticing (and misleading) the initial deals are. With the more lines of credit you have open, not only will credit companies see you as more of a risk because of your 18 different cards, but it's also easier to slip up and have them negatively affect your credit history.

These are all important things to remember the next time you haul your stash up to the check out and get offered a seemingly wonderful perk or three. It's especially important when you're in the market to buy a more expensive item, such as a sofa or a mattress set, which can cost upwards of $400 or $500. Many stores feed off the fact that we like to shop and we live for finding a good deal, but I hate getting taken advantage of and don't like seeing others get duped either. Next time you're faced with a new retail credit card application, carefully step back and weigh your options. In many instances the cons end up costing you more money if you haven't done your homework!

Wednesday, August 6, 2008

Hype over the hybrid

Let's get one thing straight: I love our planet. I like clean air and I don't want to die some slow, painful death, choking on thick carbon fumes that lay blanketed within our atmosphere.

And so it's in this way that I have no problem with hybrid cars. Okay, I may have a couple problems with the whole affair -- such as the body design of the Prius (ick), and the fact that the production and recycling of hybrid batteries is rumored to be wretched for the environment. Yet, all in all, I think the idea of hybrid cars is great.

But I've recently heard many people proudly brag about how much money they're saving by driving a hybrid vehicle. These staunch purveyors of a greener tomorrow may feel like they're saving behind the wheel of one of these bad boys, but are they really? What is the total cost of ownership of said hybrid versus an older, used car? I read somewhere the other day that the price of gas has risen 250% in the last 10 years! Obviously any savvy saver would want to lessen gas' rising blow to the wallet, but environmental impact aside (this is a personal finance blog, after all, and not a green one!), how much do you truly save by shunning the automobiles of yesterday in favor of sleek new hybrids that purr down the freeway at 45 mpg?

Well first you have to look at the actual costs of the vehicles themselves. While hybrids tend to hold their value better than their gas-guzzling brethren, the initial cost of the hybrid is pretty high (think in the upper $20,000s). And that doesn't include all the interest that you'll have to pay back on the large car loan you'd have to take out. For comparison's sake, Love and I spent about $4,000 cash (including taxes) on our 2000 Hyundai Accent that gets about 30 mpg. In a nutshell, the longer you hold on to your hybrid, the more money you recoup on the overall cost of the car in the first place.

And so, chickadees, if you're in the mood to hop on the hybrid boat, consider how long you plan to hold on to your eco vessel. Many people I know tend to hold on to their cars for about 5 to 6 years, which doesn't necessarily recoup all the money you plopped down for the price of the auto in the first place. This problem is magnified by reports that the gas mileage posted by the EPA (Environmental Protection Agency) on many hybrids is more inflated than what it truly is. The New York Times, Wired Magazine, and Consumer Reports, among others, have said that hybrid mileage is actually 30% to 50% lower than what's generally promised, and to add metaphorical fuel to the fire, it's been reported by these same outlets that many hybrid versions of cars get almost the same mileage as their purely gasoline-sipping counterparts.

So a bit of false advertising may be the culprit, but as I said earlier, hybrids do tend to hold their value well, so even if you don't recoup the overall cost in the form of gas, at least you can take a smaller loss on the vehicle once you're ready to bid adieu.

But what is the real cost versus benefit? Let's say you're trying to decide whether to buy a new Honda Civic hybrid (sticker price: $26,000), or a used 2001 Honda Civic (about $7,000). You're okay with the high cost of the hybrid because you're sure you'll be able to justify it with all that gas money you'll be saving, right? Well if you drove 12,000 miles per year on $4 per gallon gas (the current national average), you'd pay about $88 per month in gas driving the 45-mpg hybrid. With the standard Civic you'd pay about $114 per month in gas. This all sounds fabulous until you realize that you just spent an extra $18,600 on the hybrid model to save you $312 per year on gas. In order to recoup the total cost of the hybrid in gas savings would take you about 59 years to justify the purchase. I don't know about you, but I like my cars like I like my heels -- meaning I get my use out of them and move on after a few years. (With the exception of this marvelous pair of Coach heels I own. I'd keep those for 59 years, but that's a different matter). Don't forget if you do decide to keep your hybrid that long, about every 10 years you'd also need to replace the battery, which I imagine would get pretty costly.

Air conditioning can also take its toll on the fuel economy of a hybrid vehicle, decreasing miles per gallon by 15% to 27%, according to the Idaho National Labroatory, operated under the Department of Energy.

Aside from the intrinsic resale value of hybrids (that is, until fully electric cars make their debut, which shouldn't be too far off on the horizon), there are also other perks that can save you money by investing in a green goliath. Some credit lenders offer special car loan rates for hybrid purchasers, and insurance companies such as Geico say they offer discounted car insurance. There was a time when the federal government was also offering savvy tax credits of up to $3,400 for hybrids, but unfortunately that only pertained to the first 60,000 of them made (i.e., Toyota and Honda buyers don't get the credit).

In the grand scheme of budgeters, though, recycling is always a good idea ... in many cases it can save you loads of money. Say one of your friends subscribes to Vogue and passes each issue on to you when she's finished. That saves you about $5 in newsstand charges to get your read recycled, right? Well the same logic applies to cars. Instead of buying a brand new car (hybrid or not) fresh off a factory line in a polluted area like Guangdong, buying a small used vehicle will not only ensure that its overall environmental footprint is lessened, it will also ensure that you'll be saving more money in the long run by buying a car with a cheaper upfront cost and comparable mpg.

I know many don't solely analyze the issue on a cost versus benefit basis alone. In fact many buy hybrids purely for the environmental benefits, which is great. But remember that just because you may feel like you are saving money, says Mark Shead at Productivity501.com, it may not always mean you are saving money. "Feelings are what marketing is about. What really matters is if you are saving money. Recognize that how you feel about something is probably a poor indication of its actual benefit."

Monday, August 4, 2008

Saving for retirement: "A man is not a financial plan"

"A man is not a financial plan," or so goes Wife.org's motto. I admit, I smirked out loud at the candid honesty when I first read it, but the more I thought about it, the more I feel like there's much truth for many women at the heart of this financial matter.

When I first started this blog, I wrote a post called "I am woman, hear me spend," where I pointed out that the pitfalls and caveats of retirement or situations such as divorce and widowhood tend to leave women with the short end of the financial stick. No, it's not that us girls necessarily make less than our masculine counterparts, or lack the brain power to figure out how to get our life in order. In fact, according to the U.S. Census Bureau, 28.2 million women aged 25 or older in 2007 held a bachelor's, master's, professional or doctorate degree (versus 27.6 million men), while in 2006, almost 66 million women (versus 76 million men) were actively employed.
Not to shabby, ladies!

But don't pop that bottle of champagne just yet. Women outlive men by a large margin, which means those of the feminine persuasion will need more retirement income to live on in the long run. At age 65, according to the Census Bureau, 38.3% of women live alone, versus 18% of men. It's even worse for people age 85 and older, with 57.4% of women living alone versus 29% of men.

So the real question is how well are women saving for their futures? Have they set up financial plans of their own, or do husbands, fathers, or other male relatives suffice when it comes to matters of money? A 2007 survey by financial services company The Hartford published some pretty sobering results:
  • "Women work on average about 12 years less than men. With lower lifetime earnings, women tend to save less and end up with lower levels of guaranteed retirement income through sources such as employer retirement benefits and Social Security. Women's median income in retirement is only 58% of men's."
  • "On average, a woman who is currently age 65 can expect to live to age 85 while a man can expect to live to age 82. Once a woman has reached 65, she has a 49% chance of living to age 89 and a 23% chance of living to 95."
  • "Among women age 65 and older, 60 percent are single compared to 29% of men. When a woman outlives her husband, her income in retirement decreases by 50% average yet expenses only decrease by 20%."
In a nutshell, women face longer life expectancies (yay!), but don't plan on taking the reins with financial decisions and thus have lower retirement incomes (boo) than men to boot. Not so fabulous anymore, huh? But wait! Before you start putting that champagne bottle back in the pantry, there is cause to celebrate. Why? Well, the fact that you're even reading this is a great start, and with a little personal finance knowledge, it's beyond easy to take charge of your money and future, with or without a man in your life.

I've heard it said that your retirement income should be 80% of your normal annual salary, which is, frankly, a lot of money. Couple that with a longer life expectancy -- which translates into even more stashed cash needed when visions of your current job are just a fading memory in your rearview mirror -- and you can begin to see just how important saving is or should be in your life. (Don't torture yourself, though. Saving is supposed to be viewed as a fun challenge ... a business plan for your life, so to speak. Many think that gnawing away at the bone of frugality while never sporadically indulging in life's pleasures is what saving is all about, but it's quite the opposite. It should, through carefully orchestrated investments, create a path to retirement bliss.)

The most important factor in saving is time. It's a remarkably simple equation, really: The earlier you start saving, the more you end up with in the long run. Voila! Now don't just repeat the mantra, live it! We all have our vices, for some of us they might include Crabtree and Evelyn body lotion or Alexander McQueen pumps, but that's what your play money is for (you know, all that extra dough you might have left over after you've paid your bills and yourself in the form of 401(k) or IRA deposits).

Many women might be getting a late start to saving though, and hindsight's always 20/20 (God, I hate that saying!) when you feel you missed the boat on something, right? Well, if you're a little late to the game, you can always start saving more than you normally would. Generally the average person should be saving 10% of their overall income, but if you're playing catch-up, you might want to save 15% or more annually. That might not be the most feasible option, but another way to cushion the financial blow as you're revving your saving style is to relocate to a place where the cost of living is not so high. This option is perfect for people who have no real value to their name other than the equity in their house. If you live in the Bay Area, for example, where the high cost of living is expected, try figuring out places nearby where you could live much cheaper. And if you aren't married to your current locale, go full bore and move to another state entirely (out of 50, there has to be one that suffices). I know, it's never easy to leave family and friends, but it's not that bad if you move an hour or two away and can pad your retirement account more often with higher deposits because you're able to save more. What it really comes down to is would you rather live hand to mouth for the rest of your life, struggling to get by, or would you choose living much more comfortably in a cheaper place? You decide.

On top of time being your best friend when it comes to saving, it's also important to be a team player when it comes to matters of finance in your family. (And for all you girls who aren't married yet, listen up, this is important in any situation where money is involved.) All too often, women allow the men in their lives to rule the financial roost; after all, it's easier to let them deal with all those dreary number things, isn't it?

What women don't realize, though, is that at any moment, the glass floor can fall from underneath them with an unexpected divorce, death or other personal catastrophe, leaving them to fend for themselves. Instead of being passive and letting "him" deal with all that "stuff," sit next to your boyfriend or spouse and go over the numbers together. Don't feel stupid if you have questions, chances are he doesn't know it as well as you think he does anyway (hey, none of us were born with a personal finance gene -- it's a learning process). Not only will it bring the two of you closer, but you'll have an equal say in how your investments are being funded or how much debt is being accrued or paid off, among other things. You can even drop some of the snazzy "Learn the Lingo" terms I've been supplying you with lately. I can already picture it. You: "Honey, do you really think that's the most liquid investment?" Him: "Um, what?" (Then excuses himself to discreetly look up the term "liquid" in the dictionary.)

Working together on finances as a team ensures that neither one of you will be the sole proprietor of your family's future, and that's a heck of a lot better than being helpless, vulnerable, and faced with a bunch of question marks when disaster strikes. In fact, I think it's about time you uncork that bottle of champagne and make a toast to your new financial future -- the one that you're in charge of!

Friday, August 1, 2008

Learn the lingo: CD (Certificate of Deposit)

I mentioned the term "CD" in my emergency fund post recently, but it dawned on me the other day that the word may not mean anything to all who are here to learn about the financial ropes of your lives. If any terms are at all archaic-sounding or confusing, leave me a note and let me know; you'll never be able to be the savvy capitalist you aspire to be if you can't navigate the ropes, after all! Which brings me to CDs, or certificates of deposit.

Much like a savings account, a CD is simply a place where you can keep your cash -- except with more perks! By putting your money in a CD, you promise the bank to leave your cash untouched for a certain amount of time (usually three months at the very minimum). The bank then rewards you for your promise by paying you a higher interest rate! It's basically how a loan works, but in reverse, i.e., you loan the bank your money, and they pay you for the right to hold your money for a certain chunk of time. Its that certain je ne sais quoi that's missing from just leaving your savings in a savings account (which generally has a very low interest), or in a shoebox somewhere in your close (which, sadly, yields no interest).

The interest rate the bank pays you is based on how long you agree to keep your money under lock and key with them. The longer you sign the contract for, the more money you get from them in the long run, although it depends on where you bank to determine how much more. According to CNN.com, six-month funds usually pay back 4.6% or more, but the best five-year CDs yield as little as 0.34% more than the six-monthers, and penalties for pulling out money early can be about three to six months of the interest you accrued from them. Translation: It doesn't always make sense to go with a longer CD, especially if you think there's a good chance you'd pull your money out prematurely.

And, for all of you worried that the current recession will harken back to the any semblance of the Great Depression, CDs are, of course, FDIC insured (up to $100,000).


If the thought of paying a penalty fee for money you may need in an emergency doesn't quite float your financial boat, consider laddering your CDs, which is just a fancy way of saying invest in a surfeit of CDs all at once, but with staggered maturity dates. This way, for example, you could invest in four different CDs (let's say a six-month, one year, two year and three year) and have them expire at different times, freeing up your money (plus interest) if you should so need it. If not, you can put it right back into more staggered CDs, dodging any stuffy penalties!

So coming back to the real crux of the whole situation, why are CDs a potentially smart investment? Simple. Because there are penalties for withdrawing money before your time is up, you have much more motivation to leave your savings untouched. Add to that a pre-determined interest rate you know the bank will pay you (versus up-in-the-air returns associated with riskier investments such as the stock market), and you can see why CDs may be the smartest place to keep your savings. The con, of course, is that you by siging into a CD, you cannot withdraw your money at any time (like a savings account) without facing a penalty.

Sometimes, though, that's the perfect amount of risk for an up-and-coming gal on a budget.
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