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I’ve been enjoying No Credit Needed’s 33 Days and 33 Ways to Save Money and Reduce Debt for the last couple of weeks and wanted to write in agreement to his post about calling for discounts. Calling and negotiating with every vendor possible is the easiest and most surefire way to start saving lots of money.

Over the past couple of years, I have saved thousands from continually calling the companies I do business with and simply saying, “The price you are giving me simply isn’t good enough.” Most companies are happy to oblige if you reason with them thoughtfully and factually.

Here are some places to get started:

Credit Cards

You will hear the glories of credit card rate negotiation preached on nearly every personal finance blog on the planet. This blog is no different. With a balance transfer only a click away, most credit card companies will happily notch the rate down to keep your money. After all, 10% of $100 is better than 16% of $0.

To negotiate, use these to bolster your case:

• You are willing to transfer your balance to a competitor’s card
• You are willing to cancel their card altogether
• If you have other accounts with them, tell them you are willing to cancel those accounts as well
• Tell them you are willing to take a credit line decrease in exchange for a lower rate

After having some large, unplanned expenses last year, I racked up a large amount of debt on my credit cards. After about a half hour of calling (darn those long wait times), I had the average rate on my cards down from around 15% to 10%. Although, to be honest, one card offered me 0% for 12 months to consolidate my balances with them, and I happily obliged. The other low rates are still in effect, though.

Auto Insurance

After finally getting a second car, I was looking for ways to reduce our auto insurance premiums. I called my agent at Allstate to discuss possible alternatives. I was amazed at the huge amount of possible discounts that could be applied to my account. Discounts ranged from a “good student” discount (I had started an MBA program) to an adjustment to yearly mileage for the cars to a discount for where I parked my car at night. When all was said and done, I had saved 15% on my premiums after a ten minute conversation.

Cable/Satellite

The cable/satellite rivalry presents great opportunities for saving money. I won’t get into too much detail on this one as I’m sure most of you have threatened to cancel your service at one time or another. What typically happens when you call the cable/satellite company is remarkable - deals that you have never heard of suddenly arise. You are offered 50 more channels for $10 less per month. If you push hard enough, like I did, you may end up getting expanded digital cable free for three months, $15/month for the next three months, and at a 10% discount thereafter. You should probably negotiate at least yearly with them, though, as your price will eventually return to ridiculous levels.

My advice is to do as No Credit Needed says: gather all your bills, write down what you are currently paying, and give the companies a call. Stand firm and you could be well on your way to a boatload of savings.

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It looks like I may need a new furnace in the near future. The current furnace, and air conditioning for that matter, have done well and lasted over twenty years. Given that the manufacturers estimated 7-10 years, I am very happy. To get an educated opinion on the matter, we have scheduled an appointment with a professional that will evaluate the future of the furnace.

As my wife and I discussed the matter today, she mentioned that our budget for October would be a bust if we counted the entire estimated purchase price of approximately $8,000 in the month. However, I think there is a better way to account for this purchase that makes a lot more sense.

My suggestion to her was to take the price of the furnace divided by the shorter of the estimated life of the furnace, let’s say 600 months, and the estimated remaining time we planned to stay in this house, let’s say 60 months, and use that as a monthly expense in our budget for the specified time period. This is a more business-like way of doing the accounting, but one I think can be applied to personal budgeting.

Why did I choose those time periods?

If we were to use the furnace for its entire life, the value we receive from the furnace would be spread over the life of the furnace - not just the month in which it is purchased. If we move out before the estimated life is over, I want to make sure the entire purchase price is captured. Taking the smaller of these two time periods makes sure you are not underestimating your expenses.

But it won’t match your actual cash flow…

In short, I think that’s ok. Budgeting is not necessarily only meant to make sure you have money in your bank account at the end of the month, although it can be used for that. Instead, we use budgeting to keep ourselves disciplined in our monthly spending. In the example I gave, $8,000 over 60 months, we will have to reduce our monthly spending by $133 over the next 60 months to even out this large expense.

This approach is not for everyone. As I mentioned, for those of you that use budgeting to make sure there is a certain dollar amount left in your checking account at the end of the month to avoid overdraft fees, this will likely require debt to purchase. You would then deduct the monthly payment from your budget.

One thing we didn’t finalize is whether we should have a more efficient air conditioner installed at the same time to cut our cooling costs.

Photo: VentureWeek.com

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For the past six days, my oldest daughter has been doing all the nasty stuff that comes with having a stomach bug. After the fourth day, we took her to the doctor and they diagnosed her with the Rotavirus. Apparently it’s severely contagious and extremely long-lasting, so we have had a heck of a week dealing with it. (of course, my daughter has had an even tougher week) We’re marching on, though, and praying that nobody else catches it.

This week brought some great posts from the M-Network and beyond:

M-Network

• Paid Twice talks about becoming an accidental investor.
• Being Frugal explains how to avoid Murphy’s Law.
• Single Guy Money flaunts his 1 million dollar umbrella.
• Plonkee Money has an extensive interview with Fabulously Broke.
• Moolanomy begins a series on finance basics.
• Gather Little by Little responds to a reader asking how to include a 401k in their net worth calculation.
• Debt Free Revolution debates a commenter about the use of credit cards.
• Christian Personal Finance shows you how to budget with ING Direct.
• Dough Roller continues his comparison of personal finance to chess in Protect Your King, Protect Your Assets.

This week my post, Give Your Graduate the Gift of Financial Education, was included in the Carnival of College and Finance at College and Finance. This is my first foray into this carnival, but I must say I was impressed with the quality of articles. Go check it out!

My most popular post this week was an oldie - Earn Huge Returns at Prosper.com.

Have a great weekend, everyone!

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It’s difficult to imagine a city like San Francisco or New York becoming less affordable for the average person. Even with the recent market downturn, 2 bedroom/1 bath homes with around 1,000 square feet go for well above $500,000 in San Francisco. In Manhattan, you would be lucky to get a 1 bedroom/1 bath condo with under 1,000 square feet for less than $500,000. So, with prices way out of whack with the rest of the country, they can’t become much more unaffordable, right?

According to Chris Mayer, director of the Milstein Center for Real Estate at Columbia University, homes in these “Superstar” cities may become even more unaffordable. He sites three trends that he believes will occur to inflate home prices in these cities:

The aging population

As baby boomers begin to retire in the next several years, they will begin to look at where they want to spend the rest of their lives. Ask anyone that has been to Florida, and they will tell you that many of them will prefer sunny skies and sandy beaches. Cities in California, Florida, and other warm climate states such as Arizona will see a huge demand for property that is relatively fixed (or at least scarce) in supply.

The rich getting richer and the poor getting poorer

Those that are wealthy and already live in the aforementioned cities with rapid property value appreciation will continue to stay in those cities. This will cause them to become even richer at a faster pace than those with normally appreciating homes. In 25-35 years, the population in these “Superstar” cities may be overly rich. Of course, they will still need the rest of us as maids and chauffers, right?

Globalization

At first glance, this seems like a trend that would push the rich towards other countries thus putting downard pressure on the major cities. At the same time, though, millions of rich people from other countries will begin to compete for our best real estate as well. This increase in demand will surely drive prices upwards in the most desirable cities.

To make a long story short, if you want a home in a “Superstar” city for retirement, you may want to buy it sooner rather than later. If Mr. Mayer’s trend predictions come true, retirees may find it difficult to retire in style in any of today’s hot locations.

Source: CNN Money

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The following guest post was submitted by glblguy from Gather Little by Little - A Christian Personal Finance Blog (RSS)

My boys mowed the yard the other night, and when they finished the whole front yard looked like a dust storm had gone through. What grass I have is crabgrass, the rest is mostly dirt with a few weeds and lots of completely yellow and dead grass. In the spring, it was a lucious green and completely full and thick.

Looking at our yard, my wife commented,”Why do we care about our yard so much? I am just tired of worrying about it.”

That got me thinking about how much time and money I put into my yard each spring and fall. In the spring I aireate, thatch, re-seed, fertilize and water. By May it’s beautiful, then the summer heat and drought kicks in. Within a few weeks the yard is yellowing, within a few more there is more dirt than dead grass. In just a few more large clumps of crabgrass are beginning to dominate.

Then comes September. I aireate, thatch, re-seed, fertilize and water (hmmmm, this is sounding familiar). By December the grass is dormant. Dormant is a fancy word for grass that looks dead but isn’t really.

A quick calculation of the cost each spring and fall:

• Grass Seed: $50.00
• Fertilizer: $50.00
• Aireate: $50.00
• Watering: $80.00 (for 3 months)

Total: $230.00 or $460.00 per year

Let’s assume for a few minutes that I live in my home for 20 years. Over the course of 20 years that works out to be $9,200.00. Placed into my 401k at a conservative 10% return for 20 years, it would be $10,865.00. This doesn’t even factor my time in which would inflate the numbers even further.

With that kind of money, I think my wife is right. I am tired of worrying about it, watching it grow then die just to grow and die again. Not to mention, $10,865.00 is a lot of money and frankly money I could use.

I think I’ll just leave the yard alone this fall and see how it does in the spring. I’ll keep you posted!

How much do you spend on your yard annually? Do you bother with it? Any suggestions for accomplishing the same thing more frugally? I’d love to hear your thoughts on the subject.

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Just a quick note to all those reading this through a feed reader - Financial Dominance has received a much needed aesthetic overhaul. Please click through and leave a comment or email me with your feedback.

As an added note, I know there are a few minor glitches with some of the plugins. Please be patient, and I will correct them as soon as possible!

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About six months ago, my wife and I sent the final payments into our two biggest credit cards. We had struggled with the credit card debt for the better part of five years, but, with the help of a large bonus and other miscellaneous cash, we were able to crush the remainder in one fell swoop. This would be the end of our dealings with the credit card companies, right? Wrong.

Last Friday I received yet ANOTHER set of cash advance checks to use for “special vacations or emergencies.” They keep telling me that “because of my strong financial history” they are offering me this great deal of quick cash at “only” 14.99%. Only 14.99%? I have kindly called them several times explaining that I didn’t have any use for their money anymore, and that they could stop sending these checks for security purposes. Each assures me that I will receive no more mailings, and, for good measure, attempts to convince me that I should do a balance transfer or increase my credit line. Uh, yeah, go ahead and increase it, so you look even more ridiculous with a $0 balance on a $40,000 credit line.

My biggest beef with these guys is not that they’re out to make a buck. Where I get angry is that every customer service representative seems to solve the problem, but I find out later they were unsuccessful. It is just too large a risk to have checks coming in the mail that could be used to throw me right back into debt. I’ve already stopped nearly all credit card offers using OptOutPreScreen.com. Why can’t they follow suit and just stop?

Has anybody else had any luck in stopping these mailings?

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As promised a couple of weeks ago, Financial Dominance will be undergoing a site redesign this week. Thank you for all of the suggestions on the new design. Here is what many have suggested and can expect to see in the new design:

• Less advertising
• Less “blah” (I think I solved this one by using a design with a bit more color)
• More interactive (This won’t be immediate, but I have some plans for down the road. The new site design will help me make it happen.

I appreciate all the feedback on the site redesign, and I hope everyone is as pleased as I am with the result. Please stay tuned for the changes as they will occur in the next week.

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It has been a couple of busy weeks around not only Financial Dominance with my work on the new site design but also around my real life world as well. I resumed my studies for an MBA at Lake Forest Graduate School of Management last Thursday and have worked on homework nearly every night since then. Oh well, it’s great to be busy!

I was featured in the following carnivals this week:

Carnival of Personal Finance

The Carnival of Personal Finance was hosted at KMull this week. These were my favorites from the carnival:

• Dax Desai talks about the power of self-directed IRA’s.
• MoneyNing shows how to gain wealth and save money by missing a movie. (well, actually there’s a bigger picture here, but you should read it to find out)
• Edith Yeung has an awesome article about creating passive income.

My article, Should You Listen to Financial Gurus, was included in this carnival.

Carnival of Everything Finance

The Carnival of Everything Finance was hosted at Everything Finance. These were my favorites from the carnival:

• Home Equity Loan Lowdown gives 10 free alternatives to Quicken.
• Ask the Career Counselor gives a reader a post-college career reality check

My article, Why Defining Your Investment Goals is So Important, was included in this carnival.

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The following guest post was submitted by Jaimie from I’ve Paid For This Twice Already… (RSS)

There are several recurring expenses that people have the option of paying by the month or paying in one lump sum every year. There is usually a fee associated with the monthly payment option, so it would seem on the surface that paying once a year would make the most financial sense. Although as a general rule this is true, it may not always be the case. The answer depends on many factors including what the total amount per year due is, what the fee is (calculated for the entire year) and also, what purposes that money would be serving over the course of the year if not paid in a lump sum.

To illustrate some real life scenarios for this I am going to take two such recurring payments in my own life - my life insurance premium and my auto insurance premium, and why, for us, it makes more sense to pay one of them on a yearly basis and one on a monthly basis, even though they both have the same yearly fee for monthly payments. And then illustrate a completely different scenario (the no fee for monthly payment type) with my son’s preschool tuition. It’s all about scope and scale and what other factors come into play.

First, my life insurance payment, the straightforward example. I pay $300/year for term life coverage for my spouse and I (number slightly rounded for simplicity) and if we choose to pay by the month instead we incur a $3.50 fee every month, so $42/year in fees. So if you look at that from an interest perspective, that is like charging 14% interest (42/300 x 100 = 14%) for the privilege of paying by the month. So if you can budget for it, pay the $300 once a year! Save yourself $42. There is no way you can safely and comfortably beat 14% year after year in any kind of short term investment. (Unless you owe high interest credit card debt. More on that below.)

Now, for my auto insurance payment. I have the option of paying $1000 at once annually (number slightly rounded again for simplicity) or about $84 per month, plus again a $3.50 fee per month for the latter option ($42/year, as before). Since my total due per year is $1000, you could, if looking at the fee in terms of “interest” charged on your total premium, treat this as if you are paying 4.2% in interest for the convenience of paying in monthly installments. Now…. what are you doing with the money if not paying it all at once to your insurance company? Assuming you have the money up front to pay, choosing to pay monthly instead and investing that money in a high yield online savings account at we’ll say 5% interest, you’d earn about $22 in interest (and it is taxable, so really, depending on your tax bracket, more like $15) because you have to pay a 12th of it out to the auto insurance company every month. So clearly, pay it all at once! But…. let’s deconstruct this issue a bit further before we move on. Because right now, that’s not what we are doing.

We are pretty significantly in debt. Instead of paying our auto insurance in one lump sum, but instead paying it month to month because this method frees up more money faster for us for debt reduction. Because our credit card debt has been at 9.9% interest, every dollar we put towards debt reduction is in effect giving us an instant 9.9% return. It is not the clear cut case of saving the money in a savings account and paying it out little by little, because the money we put towards debt reduction is then not available for our auto insurance premium at all. But allowing us to pay a smaller amount monthly vs one big lump payment allows us to put more money faster towards the credit card debt. So for now, it makes more sense for us to in effect pay a 4.2% interest rate on the auto insurance to pay down another 9.9% interest rate. It is all about the numbers.

Another case in which it may make sense to pay monthly vs yearly is when the total amount due yearly is very high and/or the fee is very small (or nonexistent). If there is no fee involved in stretching out the payments (like my son’s preschool tuition bill) there is no real reason to pay in advance at once. I sit his tuition money in our ING savings account at 4.5% interest and make the required payment every two months and earn interest on the balance since his school does not charge a fee for this payment structure. And in my above insurance scenarios, if you pay a $42/year fee for monthly vs yearly payments, there will be a tipping point where the amount you could sit in an interest-bearing savings account would earn more interest (minus taxes) than the fee assesed for paying monthly. This number may be rather high and it might not happen often in a practical sense, but it can happen. My insurance company for example, that monthly $3.50 service charge is the standard charge no matter what the total amount is, and many states have much higher insurance premiums than my state does. Insuring 2 cars in a no-fault state with high rates…. you may be looking at many thousands of dollars a year in payments and it may end up making financial sense to pay monthly, or at least, be a wash as far as interest paid vs interest earned.

So a simple on the face of it problem may actually be more complicated than you’d think. But in general, make sure you’re aware of what consequences your payment choices for your recurring bills hold, and choose wisely. We’d all like to save some money in the process.

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