You Can Do A Lot In An Hour!

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Years ago, my friend quit his job and decided to take some time off from work. We occasionally hanged out. In the beginning, he mentioned how he was playing tennis in the morning and meeting friends for lunch and dinner. As time went on, he seemed to be less and less busy. A year passed. One day he told me that the major accomplishment of the day was getting his laundry done. He wondered where the time was going.

heinz_doofenshmirtzWhen a major disaster occurs, first responders (firemen, doctors, nurses, volunteers) arrive to help from all over the country, maybe from a different country. They are trained and equipped to help, except their walkie-talkie radios, from different manufacturers, most likely are unable to talk to each other. So someone is assigned the task of being a message dispatcher. He is the man wearing the vest full of different radios. His job is to relay messages from one radio system to another.

A startup I joined, a decade ago, had the goal of replacing that man with an affordable and easy-to-use solution of hardware and software. It was a worthy goal because during an emergency, any delay in communication could cause additional loss of life and property. The faster we worked in the startup, the sooner we could get our product out into the field and the more lives we could potentially save. So we took it from concept to product in less than six months. I remember writing code until 3 am in the morning, driving home, going to sleep, getting up at 8 am, and driving back to work for months on end. I accomplished overnight what others might have taken a week or two to do. I wasn’t tired or sleep deprived. I was driven to wring out as much as I could from each waking hour.

Time seems to expand and contract. For my nonworking friend, time compressed so that his days flew by without much activity. In my startup job, time expanded so that I seemed to be able to do a whole lot in a little time. Alternatively, I could say that my friend’s time expanded to fill his day with laundry and my day compressed along with my day’s work into an hour. It seems that the amount of time required to do a task varies, and if you really want to, you can drastically reduce that time.

In the 2011 movie “In Time”, time is money. The more you earn, the longer you can live. If you spend all your time or run out of time, you die. The rich, with lifespans measuring in centuries or millenniums, had grown accustomed to lives of leisure. The poor worked hard to earn only enough to live another day, and any mishap (like a raise in bus fare) could mean their death.

After the authorities unfairly confiscated everything but two hours of his time, the protagonist escaped and robbed a rich lady of all her time but a day. She despairingly wondered what she was going to do with a day. Surprised, he responded that you can do a lot in a day; he thought he had been generous leaving her with a day. As the movie progressed, the protagonist ended up in increasingly worse situations; he went from having only hours to live, to minutes, and at the end, to seconds. Each time, he persevered and pushed onward. You can do a lot in an hour, in a minute, in a second if you don’t give up.

I Can Do A Lot

The movie reminded me that in the past, I could accomplish so many things in a day because I believed I could. I really can do a lot in an hour! Holding this conviction again has made me much more productive. It helps me to work smarter by looking for a more efficient approach. It forces me to focus on the essential part that needs to be done. It pushes me to think outside the box in coming up with ways to complete the task, even if one of those ways is to eliminate the task itself. It permits me to say no to requests. My time is precious and should not be wasted.

If “work expands to fill the time available for its completion” (paraphrased Parkinson’s law), then work should also contract to fit the time remaining for its completion. Procrastinators instinctively use the latter principle to meet deadlines, though usually with poor results. High performance teams have used the latter principle to focus and work together to pull off the impossible in record times. (Although, there are probably many more teams that have crashed and burned.)

“If you wait until the last minute, it only takes a minute to do.” – Stock–Sanford corollary to Parkinson’s law

Given a choice, I would want to choose the principle that directs me to do more things in the same or lesser amount of time. I’m not suggesting to rush through and do poor work. I believe that we are capable of doing high quality work in less time that we usually expect to. We just have to believe and push ourselves to. We may just end up surprising ourselves.

Your Money or Your Life

More importantly, the movie gave me a kick-in-the-pants reminder that time is very precious and that earning money costs me time. In the movie, every cost is measured in units of time, specifically your lifespan. A cup of coffee costs 15 minutes of your life. A new laptop could cost half a year. A house, a couple of decades.

Except if I think about it, it’s not just in the movie. It’s the same in real life. If I earn $10/hour and a Starbucks drink costs me $5, then that drink costs me 30 minutes. Is the coffee worth it? Probably not. That $100/month cell phone plan costs 10 hours of life per month, more than an 8 hour work shift. And a $1500 Macbook will cost a hundred fifty hours of life. Actually, everything costs even more because taxes take a chunk of life coming (income tax) and going (sales tax).

“If time is worth more than money, then why do we spend time earning it?” – Lance

The above way of thinking about money was covered in the 1992 book, “Your Money or Your Life”, by Vicki Robin and Joe Dominquez. The book’s most important premise is that money is equal to your life energy, so it behooves you to increase what an hour of your life energy earns and to spend it wisely. Instead of spending it on a Starbucks Frappuccino, you may wish to spend it on a class to acquire a new skill or career. I think that if we can start thinking of costs in terms of life energy (a.k.a. time and effort), folks may be more mindful of how they spend their money.

Awesomely, from a certain viewpoint, earnings from savings and investments (interests, dividends, and capital gains) actually add time to your lifespan. If your investment earns you $500/month, it can be considered as adding 50 hours to your lifespan (if you make $10/hour) each month. Awfully, from that same point of view, the interest you pay on your debt deducts time from your lifespan. Hours, days, months, or years of your life may be needed to service your debts.

False Opportunity Cost

When thinking of whether you should do a task yourself or pay someone to do the task, you might decide to consider what the cost to you is. If you remodel the bathroom yourself, but it would take you 500 hours, then the money equivalent cost to you would be $5000 at $10/hour. If you can hire someone who can do the work for less than $5000, it may be worth it because it ends up being less costly for you.

There is a fallacy in the above calculation if you plan to include your non-money-earning hours. If you plan to remodel the bathroom on your free time, then the cost to you may not be $5000. It may be significantly more or less, depending upon how much you value your free time or the activity you would have spent your free time on instead. If you would have spent your free time watching TV, then maybe your free time is worth only $1/hour and the cost of the work is $500. Can you hire someone to spend 500 hours working for you for $500? Probably not – it’s better for you to do the work yourself. If you plan to spend the free time taking a computer class so you can become a software engineer and earn $50/hour, then the cost to you might really be $25,000. Can you hire someone to do the work for that money or less? I think so.

In Time, We All Die

Generally, people think negatively about time. They think that it can’t be done. That there isn’t enough time to do it. That time is running out. That time is going to kill them in the end (yes it will). I suggest thinking positively. Think about how much we can do in the time given. Even better, how much more we can accomplish.

Act as if you believe that you can do most anything in an hour. Sure, you could end up taking longer than an hour (maybe two hours or two months), but you did accomplish something and maybe even eventually completed the goal. The progress is what counts. Psych and motivate yourself to exert the fullest effort by turning time into an optimistic cheerleader, instead of a pessimistic slave driver.

Remember, you can do a lot in an hour!

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Real Insurance Is Better than AppleCare

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Recently, my brother-in-law decided to buy a 13 inch Apple Macbook Pro with Retina. He asked me if the AppleCare Protection plan, which costs $249 extra, was worth it. I told him no. For the same amount of money or less, one could get a better protection plan than AppleCare.

broken-mask-robotThe AppleCare Protection plan is a 3 year extended warranty plan. It only covers malfunctioning parts. It does not cover accidental damage, loss, or theft. If you drop the Macbook and the display cracks or the laptop stops working, you are out of luck because AppleCare does not cover that. You will need to pay the full repair price, which could be $1000 or more to replace a retina display. If you spill water on the keyboard and your Macbook shorts out, that’s too bad. If you lose the Macbook or someone steals it from the safety of your house, oh well, that’s the way the cookie crumbles. AppleCare does not cover any of that.

What does AppleCare cover? Well, if your keyboard or display malfunctions through no fault of yours, then Apple will repair or replace that component. The Genius Bar members at your local Apple Store will check the Macbook for damage, such as large dents, that could cause the malfunction. If they find such damage, they can refuse the repair; if you are very lucky, you will get someone nice enough to allow the free repair. Be aware that Apple has put moisture detectors inside the Macbook so that if you spill water on it, the Genius Bar will know and can refuse the repair even if you have AppleCare Protection.

There is a reason why extended warranties are pushed so often by retailers. They make a lot of money off of them. Usually if a product such as a laptop were to fail, it would most likely fail during the first year when the product is still under the standard one year warranty. So if the customer pays for an extra year or two of warranty, that is considered an almost guaranteed 100% profit for the retailer. Not to say that there isn’t any case where a day or two after the one year warranty expired, the product failed and the owner was glad to have paid for extended warranty. That case is the exception though. The odds suggest not buying an extended warranty.

When most people buy AppleCare, I think they believe that they are buying insurance. They aren’t. Insurance could cover repair or replacement due to accidental damage, loss, or theft. AppleCare is not insurance. For the same amount of money, they could get real insurance that provides greater peace of mind.

First, before we talk insurance, make sure that you buy that expensive Macbook with an American Express credit card. (If you don’t have an American Express card, get one. There are basic American Express cards with no annual fee that provide the two benefits below.) Purchasing an item with an American Express card provides the following two benefits for free:

  • Purchase Protection: your purchase is protected for up to 90 days from the date of purchase from accidental damage or theft. You will be reimbursed up to $1000. (If you have an American Express Platinum card or similar, you get protection from loss also and up to $10,000.)
  • Extended Warranty: doubles the warranty on your purchase up to an additional year. For an extra year after the original warranty expires, if the purchase malfunctions through no fault of yours, you will be reimbursed the original cost (up to $10,000).

Purchasing the Macbook with an American Express credit card will add one additional year of extended warranty on top of the standard Apple one year warranty for free. It is a no brainer to do so. American Express service is very friendly. For example, the Wifi feature on my sister’s iPhone 4s broke (due to an Apple hardware defect) after she upgraded to iOS 7. Because it was past the one year warranty, Apple wanted $200 to replace the iPhone. I told my sister to call American Express to see if she was eligible for the free extended warranty. She was. They asked her to send them the receipt and then gave her a credit for the original cost of the iPhone. How cool is that?

Second, before buying insurance for your Macbook, check that you don’t already have it. You may have a rider on your house or rental insurance that covers your personal property such as electronics. Check to see what is covered. For example, my renter’s insurance covers theft and loss of personal property due to fire (burst pipes, etc.). Unfortunately, accidental damage is not covered. In the case of theft or loss, my rental insurance company will reimbursed me for the deprecated cost or if I purchase a replacement, they will cover the original cost. (This is nowhere as nice as American Express’ full credit of the original cost without requiring you to buy a replacement.)

If you don’t have a rider for personal property like electronics, you may want to ask your home insurance company about one. It may be the cheapest option because a rider is considered part of the bundle and you may get a better deal that way. Homeowners on forums provided some examples such as $40/year for $2000 coverage (much less than AppleCare) or $80/year for $5000 coverage for malfunctions, accidental damage, loss, and theft. The insurance cost seems to vary widely (one homeowner mentioned $15/year, another $30/year for $4000 coverage, and a third mentioned a deductible of $50).

Instead of a rider, you can purchase personal property insurance directly. Most likely, standalone insurance will be more expensive than a rider. The most recommended standalone insurance for a Macbook is an Inland Marine Insurance policy (can be gotten from several insurance companies like AllState, State Farm, and Farmers Insurance). Though originally created to cover expensive electronics on boats, the policy applies for land usage also. In a forum post (Best Insurance on Earth for your MacBook / Air etc. Far better than AppleCare), one person mentioned that it costs about $32/year for $1500 coverage of multiple devices with no deductible. (It was mentioned also that the Inland Marine Insurance policy did not cover phones.)

Another insurance mentioned was State Farm’s Personal Articles Policy, which costs $60/year for $3000 coverage. There are also insurance companies, like Safeware, that sell policies specific to high-end equipment and electronics. As with all other types of insurances, make sure to shop around to get the best deal.

When talking about insurance for electronics, Square Trade is a name that often comes up. Square Trade costs about the same as AppleCare; but in addition to the extended warranty, Square Trade covers accidental damage. Because Square Trade does not cover loss or theft, I believe that it is not the best deal. Square Trade is better than AppleCare but you can get better insurance than both for less.

Insurance is personal. I do not purchase extra insurance, such as extended warranties. (I do use an American Express card to take advantage of the free extra year of warranty though.) I am gambling that I’ll be careful enough not to break my Macbook, lose it, or be robbed. Considering all the money I have saved from not buying extra insurance or extended warranties on my many laptops, even if I have to pay full price to replace a Macbook, I will break even or come out ahead. However, if you feel more comfortable having some protection (nothing wrong with that), please consider the alternative options above to AppleCare. You will get much more bang for your buck.

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Send Me Money, Sucker!

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Recently, I got an email from a family member which reads as follow:

From: XXXX@yahoo.com
Subject: Urgent!

Hi,

I'm out of town suffering a terrible incident, I need your urgent favor,
Please email me back as soon as possible.

Thanks.

XXXX
(XXX) XXX-XXXX

The displayed email address looks correct as XXXX@yahoo.com, but when I check the headers, the reply-to address is XXXX@outlook.com. And the phone number has the wrong area code.

I recognized it as the money gram scam. Basically, if you reply to that email, you will receive a request to send money by Western Union (or a similar money transfer service), where it is easy for anyone to go and pick up the cash. (If you call the number, you will probably get voicemail.) The way this scam works is to hack into someone’s email account, send this same message to everyone in the address book, and hope that one or two people will fall for it and send money.

ScroogeMcDuckI sent a warning to my family and wasn’t surprised to find that most did not recognize this email as a scam. They were confused or thought it was a joke. The family member, whose email account was hacked, disclosed that several friends and acquaintances were calling to ask why he needed $930. This tells me that a lot of folks are not knowledgeable about Internet scams. I want to talk about scams, Internet and otherwise, and the one method that I use to fight them.

In the past, this and other frauds were perpetrated by isolated con artists. Nowadays, I believe that most of the scams on the Internet are perpetrated by criminal organizations. If I was a mafia boss, I would definitely have an Internet racket because face it, you can make a ton of money (from the hundreds of millions of victims) with very little risk of getting caught or punished, especially if you are located in another country.

So, there are groups of hundreds of criminals, backed by the best servers that dirty money can buy, running scams across the Internet (and elsewhere). They are working full-time to steal money from you and the companies you do business with. If they are truly International, they may be working full time across multiple time zones, while you are sleeping, eating, going to the bathroom, and watching TV.

You may throw up your hands in defeat at this point. And to be truthful, I agree. There is no way you can beat everything that an organization like that can throw at you. The best you can aspire to be is a potential victim that would take too much effort to defraud. Sad to say, your goal is to be less naive than the masses. Or more simply, the criminals will go for the lowest-hanging fruit and your job is to avoid being the lowest-hanging fruit.

The most powerful tool that we victims have in our arsenal is to “trust but verify” or more accurately, verify before trusting. This applies to almost everything in life. To illustrate, one of my friends did fall for the money gram scam above a couple years ago. After sending the money, she had some doubts so she called the friend up and the friend replied, “What? I’m not in XXXX country, robbed of everything, and in need of money!” My question is: Why didn’t she call up the friend or the friend’s family first before sending money? If she had verified first, the friend or the friend’s family would have told her that the email was a fake.

Email Links: Bad Idea

Avoid clicking on any links in an email, especially an email from your bank. Definitely, do not login if the link takes you to a login page where you are prompted to input your username and password. Instead, open up a browser and manually type in the address of your bank or whatever.

If you’re lucky, clicking on links indiscriminately may get your computer infected with a virus or spyware which will just slow down your computer. If you’re unlucky, a virus will erase your hard drive or a spyware will record what you type, like passwords, and transmit the data to someone who doesn’t have your best interest in mind. Worst, if you click on a link to your bank account and input your username and password, you may have just given access to your bank account to a criminal.

The last is referred to as phishing (pronounced like “fishing” because they are “phishing” for your money) which involves pretending to be a trustworthy entity in order to acquire sensitive information. Basically, someone nefarious creates a website which looks exactly like your bank’s login page. They send you a fake email from your bank with a link. When you click on the link, you are taken to the fake login page. After you input your banking username and password, they could then forward you to the real bank or just throw an error that maintenance is in progress. In the meantime, they have your username and password to access your bank account with.

Phishing may be used to gain access to accounts belonging to other companies than your bank, like investment firms, credit card companies, loan application processors, mortgage payment companies, etc. I believe that all legitimate businesses should make it a policy to not include any links in their official emails; instead, they should ask their users to manually browse to their company websites.

Note: If you receive a complicated link in an email, perhaps pointing to a specific Google or Yahoo photo album, which requires a login and you can’t figure out how to manually browse to it, here’s what you can do:

  1. Browse to the company address by manually typing it in, and log into your account.
  2. Go back to the email and click on the link.

If the link is legitimate, the system will recognize that you are already logged in and bypass the login screen. You would then go directly to that page; that is, the photo album. Doing the above will help you to avoid being tricked by a phishing website.

Phone Calls: Just Hang Up

Similar to the above, if you get a phone call from your bank and are asked to verify your identity, ask what the call is about, say bye-bye, and call your bank’s official phone number (listed on the back of your ATM card, their website, or in the phone book). Calling them directly is the equivalent of manually browsing to the company website. If the “bank” calls you and you provide your verification info (mother’s maiden name, social security, etc.), you may have just given your identity away to thieves, who could then gain access to your accounts or more likely, open a new credit card or loan in your name.

Knowing the above, the perpetrators will attempt to override your caution. A year ago, I got a phone call from my credit card company. They told me that they believed my credit card number had been stolen because they were seeing charges for flowers amounting to over a thousand dollars in Florida. They asked me to verify my identity so they can confirm that the charges were fraudulent. Of course, I answered every question they asked. Afterwards, I realized with horror that I might have just given the keys to my identity away to someone who “called” me on the phone. Thankfully it was a legitimate call, but it could have easily been a trick. What I should have done was ask them what the call was about, hang up, and call the credit card company back directly.

Phishing: Old as the Pharaohs

Phishing isn’t something new on the Internet; it has been around for a long time. I’m sure it has been around since mankind first discovered how to cheat and steal. I think all effective scams involve the use of phishing (again, pretending to be a trustworthy entity) because no one hands their money to some entity they don’t trust.

For example, suppose that you are on a business trip. You arrive late at the hotel. You’re hungry but too tired to go out. Conveniently, there is a flyer for pizza delivery that someone slipped under the hotel room’s door. You dial up the pizza place, make an order, and pay with your credit card. An hour later, the pizza hasn’t arrived yet. You call back and get some lame excuse like the oven has exploded, sorry, but there won’t be pizza for anyone. Or maybe no one picks up. Congratulations, you’ve just had your credit card number stolen.

Remember what P.T. Barnum supposedly said, “There’s a sucker born every minute.” Try not to be that sucker. But if you fall for a scam (which I must embarrassingly admit to once or twice), forgive yourself. You are only human. Just repeat to yourself, “There’s a human born every minute.” (To be exact, there’s a human born every 8 seconds.)

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California E-File For Free

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I use TurboTax to do my federal and California state income taxes. When e-file first became available, I remember having to pay a “convenience” fee of $15 each (for a total of $30). It seemed strange to me that I had to pay to save the federal and state government money; they didn’t have to hire someone to input my printed tax forms after all. Thankfully, a few years ago, the IRS finally realized this and made federal e-file free. Unfortunately, the state e-file for TurboTax has always required a fee, which has increased to $19.99 this year.

CalFile

UncleSamMagooInitially I blamed California for the state e-file fee; but last year, I found that California did provide several options to e-file for free and that I qualified for CalFile. The $19.99 fee is actually imposed by Intuit as a service fee. CalFile is a web-based application that allows you to fill in and submit an online Schedule CA 540 state income tax form to the California Franchise Tax Board. Because I had the California 540 form completed in TurboTax, all I did was to copy the total amounts from TurboTax into the CalFile web forms (which referred to amounts on the state 540 and federal 1040 forms by line numbers).

CalFile is totally free and easy to use. If your taxes are simple and you make less than $169,000 if single (or higher amounts if head of household or married), you can use CalFile. Check the CalFile qualifications. This year, you are required to create an account to use CalFile; however, both the CalFile Deluxe and Basic account types are free. An account allows you to quit and continue your online 540 form at a later time.

If you are doing state income tax for another state than California, I suggest going to your state’s website to see if there are free e-file options available.

CA SDI vs. VPDI

While we are on the subject of income taxes, when doing an itemized federal income tax return, you are allowed to deduct mandatory state fees in addition to the state income tax. Such a mandatory state fee is the California State Disability Insurance, which appears on the W2 form as “CA SDI”. If you work in California, this state-administered disability insurance premium is automatically deducted from your paycheck and totals to around $1000 a year. On the federal income tax return, this mandatory fee is considered a state tax and thus is deductible.

Until a couple years ago, TurboTax did not deduct the CA SDI in my itemized federal 1040 form, even when I explicitly inputted it as part of the W2 form. I had to manually work around TurboTax’s limitation by changing the deduction amount in the 1040 Schedule A form (line 5, “State and local Income taxes”). The latest version of TurboTax will recognize the CA SDI input on the W2 form, tag it as a “CA SDI” type, and deduct it properly on the Schedule A form.

In California, as an alternative to CA SDI, employers have the option to administer their own disability insurance plans, which must provide equivalent benefits as the CA SDI plan does. This is called the California Voluntary Plan Disability Insurance, which appears on your W2 as “CA VPDI” or CAVPDI. Because the costs of the plan, including administration and any employee subsidies, are considered a deductible business expense, some companies may decide to go with a CA VPDI after running the numbers and finding out that they could get a net gain.

When the CA VPDI first appeared, it was unclear as to whether or not an employee can deduct the CA VPDI on the federal income tax return. It is a mandatory fee indirectly mandated by the state after all. And from what I heard, the IRS did not correct the forms submitted by those who treated the CA VPDI the same as a deductible CA SDI. Unfortunately, the IRS eventually decided that the CA VPDI was not deductible by employees in the IRS Rev. Rul 81-194 ruling, which stated:

“Amounts withheld from wages of employees for contributions to voluntary plans are nondeductible personal expenses under section 262 and are not deductible as taxes, business expenses, or medical expenses.”

This IRS ruling is not a big surprise. This decision resulted in more tax revenue for the federal government, so it was actually a no-brainer decision. California followed suit by issuing an update to the Schedule CA 540 instructions to omit wording which suggested that the CA VPDI was deductible on the federal income tax reform.

So, just remember that you can deduct CA SDI, but you can’t deduct CA VPDI. The latest version of TurboTax will recognize the CA VPDI on the W2 form as a “CA VPDI” type and won’t deduct it in the 1040 Schedule A form.

Just in case, don’t forget that you can deduct your car’s vehicle license fee, which is a part of the yearly DMV vehicle registration. The vehicle license fee amount can be found in the itemized costs on the DMV vehicle registration renewal form that you get each year. It is a mandatory state fee and can be deducted on your federal income tax return.

Free Tax Software

I suggest filing your income taxes late so that you can borrow the TurboTax software CD (preferably, the version that includes one free state) from your family or friends once they are done with it. This will save you the cost of purchasing TurboTax, which varies from $40 and up. Alternatively, the online version of TurboTax provides free federal filing, but requires an additional $27.99 for a state filing.

I believe that the above information still applies if you use other tax software, like TaxCut.

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I Don’t Recall Agreeing To Pay For Curbside Painting!

Money 3 Comments

Yesterday, as I was taking garbage out to the curb, a young man passed a flyer to me. The flyer announced that the house numbers on the curb were to be repainted and residents were being asked to contribute money towards that goal. The flyer had wording that falsely implied the following:

  • With an official sounding headline “Advisory Notice To All Residents” and references to “911” and “postal-mail”, the flyer suggests a relationship with the city government; perhaps they are hired by the city. This is false; I doubt they are a real company (there was no telephone or website listed on the flyer) and definitely, the city did not hire them. The real story is that several years ago, the city did hire a company to repaint certain neighborhoods. After that, the city never repeated that initiative again.
  • The flyer asks for a contribution of $15 or “what is most comfortable for your budget”, implying that the city is asking for help to fund this initiative (if you believe they are affiliated with the city). This is false; you can bet that any money will go to their pockets, not the city’s.
  • If you do not wish to have your house number repainted on the curb, you must tape the flyer to the curb. Otherwise, they assume that you have agreed to the repainting. Of course, they don’t state on what day they would paint so there’s no guarantee that the flyer will still be there when they come.

At first, I was very annoyed. I didn’t want to pay to have my house number repainted on the curb. Now, I had to go get some sturdy tape so I can tape that darn flyer to the curb. Then I thought, these guys are marketing geniuses! They took the opt-out marketing idea from the Internet and added a bit of local patriotism (donate to help the city) to make a lot of money. For about 50 cents worth of spray paint (and an initial investment in number stencils), they could potentially get $15 back. Even if they just got a dollar, they would still be profitable! Most likely, they will get between 5 and 15 dollars from each house.

For those who don’t know about opt-out, it was a strategy initially used on the Internet by companies to quickly create email lists of customers. The trick is to assume that any time a customer provides an email address, the customer has agreed to receive emails from the company; for example, when you purchase an item and provide your email address for order/shipping updates. In order to not receive emails, the customer would have to explicitly opt-out of the mailings. Of course, most customers considered these company advertising emails to be spam.

Soon after, many web order forms (purchasing forms, download forms, information request forms, etc.) started to display checkboxes already pre-checked to subscribe the customer to the company mailist and even worse, to subscribe the customer to paid services. The latter is especially heinous because I have fallen victim to it several times. Years ago, after I had signed up for a 3-month special with Match.com and allowed it to lapse, I was surprised to see a charge on my credit card for another 3 months at full price. Evidently, Match.com opted me into an automatic re-subscription service (I do not recall seeing that checkbox on the signup form). Worst, Match.com refused to reverse the charges because I had “agreed” to the charge; I had not manually changed my account settings to disallow automatic re-subscription. A recent example is when I purchased a game from BigFishGames.com and found myself subscribed to their $6.99/month Game Club membership service; I quickly unsubscribed by calling their customer service number.

You will also see the opt-out strategy when installing software, especially free software. One of the many installation screens would have pre-checked boxes to install other software (such as browser toolbars, Google Earth, and Yahoo Messenger). This additional software will fill up your hard drive space (best case), slow down your computer with automatically-launched programs (worse case), and/or install viruses and spyware (worst case). Whenever I am diagnosing a computer because it was “too slow” or “acting weird”, my first action is to find and remove this unwanted software. I’ve seen browsers start with 5-6 toolbars, each with its own search input field. When asked about these toolbars, the user would invariably say, “I don’t know where they came from.”

Unsolicited company email is a nuisance and thankfully, there are mechanisms (“mark as spam” on Google or Yahoo Mail) that will eventually get that company email blacklisted. Extraneous software installations are the “payment” you make for free software; to avoid, just look carefully at every checkbox during installation. But companies that pull the opt-out paid service ploy are evil because they cost you your hard-earned money and time (which you spend trying to get out of the paid service). These companies get on my boycott list and they lose me, my family, and friends as customers.

My advice to companies is to not use opt-out because in the long run, they will lose their existing and new customers (once word gets around). However, the curbside painters are still geniuses because their use of the opt-out technique has very little downside. There is no need to retain customers as a repainting is not necessary again for years (though they imply that it is a yearly event) and there are many new neighborhoods filled with unsuspecting marks, I mean customers.

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It’s Your Hard-earned Money! It’s Not Easy Money!

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I have a very good friend who had problems controlling his spending. Anything that caught his interest, he would buy. He would end up buying things which he would never use… mostly because he had purchased something else which he thought would be better. But then he ended up not using that at all or much because it just wasn’t good or something else was better. And so on.

A couple years ago, he expressed interest in learning how to be frugal like me. I replied that I didn’t think he wanted to be as frugal as me because I was using him to learn how not to be so frugal with myself. I didn’t have a problem spending on family and close friends, but couldn’t bring myself to spend much on me. My friend definitely didn’t have a problem spending on himself. I concluded that between our two extremes of spendthrift and frugality, there was a healthy middle ground.

My first suggestion was to apply some discipline to his habit of what to me was impulse buying. First, he should ask himself if the item was something he just wanted or if it was something he really needed? Second, once he determines that he needs it, he should take time to research which brand/option was the best bang-for-the-buck. As a simple rule of thumb, I suggested waiting a day before buying. Waiting a day would allow time for research and, more importantly, for the feelings of “want” to fade and for a more practical mindset to come into play. I was hopeful that this would naturally limit his purchases to well-researched products which are what he needs or really, really wants.

The “really, really wants” is the exception to the frugality rule and the lesson I picked up from my friend. I learned that it was okay to treat myself to things that I don’t necessarily need, but just want. And that I should treat myself as a reward for achieving a goal, doing good work, etc. Since then, I have “forced” myself to buy an expensive present that I don’t really need, but just want, for my birthday each year.

Since then, my friend has improved tremendously (for math heads, we are talking an order of magnitude improvement) in reducing his spending habits. However, he was still spending more than he wanted to. During a recent conversation, we realized that his relationship with money was different from mine’s. While I treated the majority of my money as hard-earned, he treated the majority of his money as easy. So while I was keeping a tight fist around my bills, he was holding his up to the wind with open palms.

The hints were there through the years but I had missed them. Even when I finally realized it, I had to talk to my friend a bit to make it clear. During this recent conversation, my friend was contemplating an expensive software purchase, say $500, which he had researched and believed he needed. The cost was prohibitive though and then, from my point of view, he attempted to reduce the impact of the cost. To do so, he indicated that he had gotten a rebate check of $100 and that he had returned some items to the store for $200… so that made the software just $200 ($500 – $100 – $200). That is a steal and he should totally buy it.

While I did agree that he should buy the software because he needed it, I was thinking “What the heck? The software costs $500, not $200!” After a few back and forth, my friend indicated that he treated money which he didn’t expect (income tax returns, rebates, product returns to stores, cash gifts, etc.) as “free” or “easy” money. This easy money then is used to offset the cost of any purchase that occurs after getting the easy money.

My reply was along the lines of “What? That’s your damn hard-earned money. It’s not easy and it’s definitely not free.” With the exception of the cash gift from others, the rest were his hard-earned money. The income tax return is part of his salary which he loaned interest-free to the government. The rebate is a return of the extra money which came from him in the first place. The money he got back from returning products to stores is his own precious money. My friend pointed out that I seem to keep track of the origin of the money (if it is originally my money, I will remember); whereas, he didn’t track the origin at all. So for my friend, any money which he received which didn’t come directly from a salary check was easy money. And the problem was that spending easy money was well, pretty easy.

I am not sure whether the above will help my friend control his spending more. My friend assures me that it is a huge revelation for him and that he is looking at his past purchases with a new viewpoint and understanding. My friend suggested that I write a blog about the realization above to help others who might benefit. My first thought was that there couldn’t be many others with the same money issues as him, but then another friend called.

She wanted my opinion on whether she should refinance her mortgage. She was afraid that if she refinance to a lower interest rate, her mortgage tax deduction would be smaller. I am like, “Say what? You want to pay more so you can deduct more on your income tax form?” That’s like offering to give someone more money so they will give you a little bit more back. Or more concretely, if I give you $10, you will give me $1 back. So if I give you $20, you will give me $2 back. Gee, what a great deal! I better give you $200, then I will get $20 back. That’s easy money!

I’m being silly and dramatic. My conversations weren’t as bad as that. But it gave me extra incentive to write this blog. Please, everyone, it’s your hard-earned money that you are spending!

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The Rebate Master From Heck

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handovermoneyThis title was bestowed upon me by a friend for going out of my way to get those darn rebate checks. Rebates turn a good deal into a great deal, if you get the rebate.

Here’s what companies offering rebates expect:

  1. Most folks will forget to send or don’t want to bother with sending in the rebate coupon.
  2. Most folks will forget that they’ve sent in a rebate coupon.
  3. Most folks won’t bother calling up to ask why they haven’t received their rebate. Some companies will wait for this call before cutting and sending the check out.

Then there are nerds like me who xerox all the paperwork sent in as evidence, who keep track of outstanding rebate checks (a PalmPilot is good for this), and who will call up the company when the rebate check due date expires.

So far, most namebrand companies (like Maxell, TDK, Memorex) honor the rebate coupon when they receive it. Other namebrand companies (like Diamond Multimedia) will wait for the phone call before sending out the check.

Don’t send rebate coupons to no-namebrand companies if you can help it. You have a low chance of getting the rebate check back. Avoid buying a no-namebrand product just because the rebate makes it a good deal. Buy it only if it’s already a good deal and the rebate makes it a great deal.

If you’re sending a rebate coupon to CompUSA (“The Rebate Store From Heck”), you can kiss it good-bye.

If you need to send in more than one rebate for the same product, check that there isn’t a one per household restriction. If so, just use a friend’s name and address. (Make sure you enter which friend into the PalmPilot. Hey, that’s what friends are for! Abuse, Neglect….)

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