Sunday, November 25, 2007

Black Friday and Cyber Monday Mean Only One Thing: It's Time for the Holiday Budget!

Well, its that time of year again. It's time to rush out to the stores (or click that mouse) and buy $400 laptops, $600 LCD TVs, and $100 GPS devices. Of course, those are money losing propositions for the stores (and sleep losing for you if you were one of the people standing in line at 4 AM), but the stores are counting on the increased foot traffic from everybody else who oversleeps and misses those deals to more than make up the difference. In order to not fall victim to the stores around the holidays it is critical that you go in with a clear battle plan: a holiday budget.

The concept of the holiday budget is pretty simple. Start with a total over-arching amount you are willing to spend on gifts. Set out a list of people that you need to buy for. Preferably ask those people for a list of what they would like. Match their lists to your list and budget. Presto! You have achieved holiday budget feng shui. The key here is having a plan and not just window shopping your way through your list as you will inevitably: a) spend more than you think b) buy someone two presents, and/or c) forget someone you should have remembered. If you have a plan and stick to it you will not have any of these problems.

Once you are done with this year's shopping remember how much you spent in aggregate. Then save that number divided by 12 each month next year to build up your "holiday buffer" so you don't have a nasty surprise around the holidays. It's a little like the elves building toys in Santa's workshop all year long. If they tried to build the toys of all those girls and boys in the last month of the year they would never get it all done. They have to build them a little at a time all year long. You too should save a little each month to build up that holiday shopping buffer. The exact wrong thing to do is rack up a big credit card bill at the end of the year and then spend many months and additional dollars paying it off. Trust me, your kids, family, and friends don't want you to be in that situation and neither do you. Plan ahead and avoid that trap. Credit card debt is bad debt, avoid it at all costs especially around the holidays. Your holiday budget and (next year) your holiday buffer should help you avoid the kind of credit card debt that will inspire Santa to put coal in your stocking.

Sunday, November 18, 2007

Be Thankful for No Recession in 2007: Get Prepared for One in 2008 (and hope it doesn't happen!)

Well, this week millions of American families will sit down to a feast of turkey, stuffing, cranberries, etc. It has been another prosperous year for the US economy so far, so those tables should be full. GDP grew at a seasonally adjusted annual rate of 0.6%, 3.8%, and 3.9% in Q1, Q2, and Q3 respectively. However, some economists are worried about the outlook for 2008. Indeed, an article in the Economist this week suggests a number of reasons we might get one in 2008 including: falling housing prices, tighter lending standards, higher debt loads, higher fuel costs, and slowing job growth. For the uninitiated a recession is typically defined by two or more quarters of shrinking GDP. During a recession you tend to see a decrease in consumption and an increase in unemployment.

What could a recession mean for you in 2008? Could it mean widespread corporate layoffs that might include you? Could it mean a terrible stock market that hurts the value of your portfolio? Could it mean you won't get that raise you are counting on? It could mean any of these things. So, with even a modest risk of recession, it makes sense to start getting prepared now. Between tryptophan induced naps and football kick-offs this weekend take some time to think about how your finances would weather a recession. Do you leave yourself some buffer so you don't need to live paycheck to paycheck? Do you have 3-6 months salary saved in a money market or treasury account? If you lost your job and had to take a lower paying one could you and/or your family get by for a year? If the answer to any of these questions is "No," it may be time to pass on another helping of pumpkin pie and get out a piece of paper. Write down some goals that will help you get to "yes" on all of the questions above. Doing this should be simple, write down how much you can start saving every week by cutting down on some of your discretionary spend. Cut out enough discretionary spend to get yourself to "yes" over the next 12 months. Post the plan somewhere where you will see it daily and stick to it. Once you do this you can rest assured that your 2008 Thanksgiving feast will be just as good this year's, recession or not.

Saturday, November 10, 2007

Roomba: A gadget that's worth it!

I'll admit it, my wife and I have a Roomba and we love it. We got it as a wedding present from my brothers. Normally, I would never go out and spend $300 on a gimmicky gadget like the Roomba, but now that we have one we will never go back. This thing is awesome! It can be scheduled to run by itself while we are away at work. It sucks up pretty much anything a normal vacuum would including cat hair which is a big problem in our house. There is nothing like coming home from work to a vacuumed house.

That's not to say that its perfect. Occasionally our Roomba fails to detect the stairs and makes a suicide dive. Nonetheless, this is one tough cookie, once you put him back together again he is ready to go. One time he did stop working so we sent him back. iRobot had great customer service and sent us a whole new Roomba in no time. The Roomba also occasionally misses corners due to his round shape.

For all his imperfections the Roomba still does an awesome job cleaning our house and I would recommend the product to anyone. Has anyone tried the Scooba or the Looj? Leave a comment to let me know if they are just as good as the Roomba. Meanwhile, I'll continue to wait for the Lawnba.

Sunday, November 4, 2007

Multiple Appliance Discounts: Not Necessarily a Good Deal!

Well my wife and I went to the Home Depot today to buy some appliances for our kitchen remodel project. Besides melting my credit card, I learned that there are some discounts that just aren't worth getting. For instance, GE was offering up to $300 off on the purchase of multiple appliances. We wanted a GE dishwasher, but to get the discount we had to buy a GE range or a refrigerator. Unfortunately, my wife already had her heart set on a Jenn Air range due to a few of its features. That left a refrigerator. However, the price difference between the GE and the LG we had looked at before coming to the store for the price and features we wanted was nearly $1000. Needless to say, we actually saved more money by mixing and matching then falling for the trap of upgrading to an expensive GE with more features than we wanted or needed.