Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective

Archive for the 'Ask the Readers' Category

That's all that's left!

Creative Commons License photo figure credit: pfala

The May issue of Money Magazine has an article with poll results about how people have been changed by the current financial crisis.  The results seem to indicate that there will be many lasting effects of the crisis in much the same way that the Great Depression changed the relationship that almost all of its survivors had with money.  Savings rates are up, consumer spending is down, and people report that they value their families more and money less than they did before the crisis started.  If this is the case, maybe the crisis isn’t such a bad thing?

From the poll:

  • Nine of 10 respondents said they have changed the way they manage their money as a result of the economic crisis
  • Seven of 10 said their priorities are shiftng as well
  • A “whopping” 94% said the recession will have a lasting impact on the way they handle their finances

Naturally, I started to think about whether and how the crisis has affected how we deal with money.  I think that the basics of our money management system have not changed.  We still make monthly contributions to our Roth IRAs, put aside some money for charity, add to our emergency fund, and plug away at our car loan, business loan, and mortgage.  Because we are relatively young, we continue to invest most of our retirement money in stock market index funds (which have gained 30% in value over the last month, by the way…) diversified across a number of different global markets.  Our monthly contributions are taking advantage of dollar cost averaging.

After ScrapperMom’s layoff in October, however, I became far more concerned about how long we could get by with no income — i.e. the size of our emergency fund.  Currently all of the money that’s technically allocated for emergencies gives us a 3.75 month buffer (up by 1.45 months since August) and 4.9 months of savings if you count all of our cash on hand.  This is still a pretty nice cushion, but in a tough economy it could take a year to find a job to support our current lifestyle (see Avoiding Lifestyle Inflation to keep yourself out of this situation in the first place).  It took me 9 months to find work after the terrorist attacks of September 11, 2001.  Few places were hiring at the time simply because of uncertainty.

So, if anything has changed in the last 6 months in the way we deal with our money, it’s that we have been putting more of an emphasis on building a larger emergency fund and lowering our fixed monthly expenses.  Little by little we have been socking away more money to roll into our emergency fund CD ladder.  At the same time, we have been paying down the debts that require us to make monthly payments, such as our business and car loans.  Once these debts are paid off, then the “size” of our emergency fund will “grow” overnight by virtue of the fact that the same money will last longer should the need arise when we have fewer monthly obligations.

What about you?  Have you changed the way you deal with money since the beginning of this crisis?  Have you changed your investment strategy at all?  If so, how?  If not, why not?

Shaw's Cards

photo figure credit: ScrapperMom

This past Sunday morning ScrapperMom was perusing the grocery store circular when this offer caught her eye (my emphasis added):

Choose your tax refund reward. Customers can purchase gift cards with their Shaw’s Rewards Card (for carded markets) at their local store’s Customer Service center.  No tax form or refund check is necessary.  Customers may purchase a grocery store gift card at $250 or $300.  Each gift card will be loaded with an additional $20 for a $250 purchase or $30 for a $300 purchase.  There is no limit for the amount of cards a customer can purchase. The additional bonus amount cannot be used for the purchase of alcohol, fuel, tobacco, lottery tickets, dairy products, prescription drugs or additional gift cards.  Offer is available March 13, 2009 through April 15, 2009.

Shaw’s is one of our local grocery stores (same company as Star Market), and it ran a similar 10% bonus during last year’s Economic Stimulus check mailings.  Apparently the response from customers and reward for Shaw’s was so great that they’ve decided to run this offer during tax season this year as well.  The limit before was whatever the size of your stimulus check was, and we took full advantage.  But I’m really psyched that there’s no limit on this offer.

Clearly this is a great deal no matter how you slice it.  The offer is for a store that we visit at least once per week, where we spend at least $250 per month, and that sells necessities, namely food.  The only real question is how much advantage we can take.  There are a few factors that limit how many of these cards we should buy:

  • How much cash we have available.
  • What the cost is to tie up this cash for whatever time it will take to use up all of the cards that we buy.
  • Whether this is really a no limit offer.

Because we don’t live paycheck to paycheck, we actually have somewhere between $10,000 and $15,000 available on hand in cash that we could use for this “investment” that is not technically part of our emergency fund.  It turns out that we also gave the government too big of an interest free loan last year, so we’re going to be getting a healthy refund which we can also roll into purchasing discount gift cards.

I ran some quick math to see how soon I would have to spend the gift card before we would have just been better off sticking the money in a CD.  I figured out that if I could earn 3.5%, tax free,  on a $300 investment today, it would take 34 months to earn 10% on the initial investment.  That means that as long as I can spend the gift card within the next 3 years (because with taxes it will take longer than 34 months to accrue 10%) I will be getting a better return by buying the gift card.

I asked myself if there were any down sides to this offer as well.  One that pops to mind is that we’ll be tying up lots of cash that we may need for other things.  The nice thing about these gift cards, however, is that we can easily trade them for cash, and if things ever get that bad, we’ll still have to eat, so having grocery cards is not such a bad thing.  Another thing we’ll need to be careful about is where and how we store the cards.  Having the equivalent of thousands of dollars in cash laying around has risks: fire, theft, loss, etc.  We’ll have to figure out a way to deal with that.  Lastly, what if the store goes out of business?  This is certainly something about which to be concerned, but this is a chain that has been around as long as I can remember, stores don’t usually just all of a sudden stop honoring gift cards, and as above we should be able to liquidate them quickly if it comes to that.

We still haven’t decided exactly how many of these cards we’ll buy in total.  We spent about $5,400 on groceries in 2008, so we can buy a lot of these cards and still come out ahead.  Yesterday ScrapperMom went to the Customer Service desk to buy 6 of them and was told that you can only buy 5 per customer per day.  So there is, apparently, a limit, but I still don’t think it should affect how many we want to buy (though if it did I would argue that the ad does say “no limit”).

What do you think?  Should we stock up on $10,000 worth of these cards (or the closest multiple of $300) and get an instant $1,000 back?  Is this a deal that interests you?  How many will you buy or would you buy if you could?  Are there downsides or risks that we’ve yet to consider? Leave a comment below!

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11.24.2008
fall scene

Creative Commons License photo figure credit: controltheweb

We had a slight altercation this week with the neighbors. As I sat to eat breakfast I looked out to the sound of leaf blowing. I was somewhat astonished that my neighbor (a renter of the house next door) was blowing the leaves from his side yard into my driveway. Now I may have not noticed this new pile of leaves if not for the fact that we had cleaned up the whole back, side yard and driveway over the weekend and had filled about 15 leaf bags. Trusting in the decency of humanity I made the assumption that he was putting the leaves there for ease of picking them up after he was finished. Plus with a toddler covered in syrup I was in no position to run out and approach him about the situation and what his plans were.

Fast forward a few days. The leaves sit where they were blown, in our driveway. The landlord for the property is parked in the driveway. I run out to have a word with him. I calmly explain that his tenant had blown leaves into our driveway and I did not appreciate that since I had already cleaned all my leaves and the leaves in his side yard were his responsibility. He proceeded to tell me (remember I am 8 months pregnant) that they were my leaves because they fell off my tree and it was only fair that I picked them up. He also told me that he is a very busy man (aren’t we all) and didn’t have time for fall maintenance. I told him it is not my fault that leaves from a tree in my yard fall into his yard. Unfortunately that is how leaves work. My mother-in-law knows this all too well. The winds are never kind to her and leaves often end up piling up in her yard regardless of where they fell from.

I thought this whole conversation was mind boggling and was at a total loss for words. He even offered me some leaf bags so that I could pick them up myself. How nice…

Of course MITBeta was not very happy with this outcome and being the diplomat that he is went back out to have a word with our neighbor’s landlord.  As I watched from the window I saw them chatting for a while and then I noticed them picking up the leaves together. It took them about 10 minutes total and MITBeta reported back to me that the landlord had apologized to me for our earlier conversation.

What do you readers think? We feel that raking leaves is an unfortunate but necessary evil of having glorious shade. It’s Murphy’s Law that he who has no trees will have all the leaves blow into his yard. But I’m pretty sure the leaf code suggests that I do not need to go get those leaves from my neighbor’s yard. We like trees and will suffer with fall clean-up because we are too frugal to pay someone to do it for us, whether I’m pregnant or not. How about you? Do you loathe raking? If you own properties, do you use a landscaping company to clean your properties?

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