The Bigbucks Coffee Addiction

The fastest way to tighten the belt and fatten the wallet is to cut down on what I like to call "fringe spending." Fringe spending encompasses all the little pleasures in life we choose to spend our money on that go beyond meeting our basic needs and instead fulfill our wants and desires. One of the biggest contributors in this arena is the cup of coffee many people purchase on a daily basis. As an inconsistent (non-daily) coffee drinker, I'm not sure how qualified I am to weigh in on this topic, but with that disclaimer, here it goes.

Once upon a time, life was simple. TV shows were funny, phones were connected to the wall, Al Gore had yet to invent the Internet, and coffee could be purchased with the spare change in your pocket. Gone are the days. Enter the age of "reality" TV, the information superhighway, and premium coffee shops. No longer just a cheap morning pick-me-up, coffee has become a relatively expensive social staple. Unless we are talking about the guy who sounds like a piggy bank every time he takes a step or the gal who gets a shoulder work out carrying around a couple extra pounds of US currency in her purse, nowadays premium coffee will run you a bit more than the change in your pocket.

Depending on where you live, the average price of a coffee drink at places like Starbucks is between $3-$4. That is 5 to 6 times higher than the cost of a "cup of Joe" in the good old days (circa 1990). Now granted, we haven't taken into account the effects of inflation, but I would venture to say that most people's income and cost of living have not increased five fold since the days of New Kids on the Block (aren't they on a reunion tour...bizarre), mall bangs, and neon colored clothing. In short, the cost to feed one's daily caffeine fix has drastically increased over the past decade and a half.

What I'm about to outline here is nothing the daily coffee purchaser hasn't already heard before (at least for those that haven't been living under a rock the last year as home prices have crapped out, the stock market has plunged, and suddenly everyone feels a lot poorer). Cutting out the purchase of a daily cup of coffee can lead to significant savings in the long run. Let's assume that the average coffee drink costs $4.00 (with tax and tip) and that one purchases this drink 5 times a week (every work day). That's an annual cost of $1,040. That adds up to be over $41,000 (in today's dollars adjusted for inflation) in cost over the average 40 year working career. If instead, this money was invested in a diversified index fund (more to come on the specifics of such a fund in the future) that returns around 7% (inflation adjusted) on average a year, one would be sitting on a cool 200 grand after 40 years. These assumptions are all using today's dollars, so that 200,000 would have the same buying power in 40 years as it does today (in reality it would be much larger than 200k because of inflation)... a hefty ransom by most people's standards.

So what should be done to eliminate or at least reduce this drain on our savings? Again, I'm not a coffee expert so please take my opinions with a grain of salt, but I would suggest the following:

• Brew it at home. I know that it is impossible to replicate the same cup of coffee that one gets at a coffee house, but from what I hear, a coffee press is an excellent alternative for that coffee house flavor in the comfort of your own home. Assuming a pound of whole coffee beans cost between $10-$15 and makes around 30-40 cups, the cost of making your own coffee is only around $0.25 - $0.50 per cup (oddly enough, close to the pocket change number it use to cost "back in the day").
• Order the cheap stuff. If you work in an office it is impossible to avoid the occasional (if not frequent) trip to the local coffee house. When you do find yourself at such an establishment, consider the less expensive items on the menu to save some coin. This former Starbucks employee suggests a half coffee half steamed milk concoction know as a Misto (where do they come up with these names?) as a cheaper alternative to a latte, a vanilla iced coffee instead of an iced latte, and a hot chocolate with a shot of espresso instead of a mocha.

Coffee is very much apart of our daily lives. Not only is it a tasty conduit for our daily caffeine fix, but coffee establishments have created a "watering hole" for people to congregate outside of the home and the office. There is nothing wrong with buying an occasional cup of expensive coffee as long as it fits within a budgeted allowance for such expenditures. The spending pecking order should go something like basic needs, then future needs (savings), and finally luxury items/fringe spending.

Ciao,
Franco

Buying Used Cars

Hopefully, after digesting one of my previous posts, some readers have decided to explore the wonderful world of used cars. Congratulations on you big leap out of the man's propaganda campaign and into the more sensible Franco's Army...the frugal, non-football version (on a side note, I only joke about "the man" because I find it funny. I'm a true capitalist at heart). So what are the most important things to consider when buying a used car? I won't pretend that my list is exhaustive, but here a couple things that have done me well over the years.

The first thing I do when looking for a "new to me" car is check Consumer Guide for independent reviews on different makes and models. Make sure you know what you're getting into by researching and asking people who have owned the car (or at least a similar model) before you pull the trigger. I have a personal bias for German (excluding the JokesWagon) made automobiles because I like the way they handle and feel the engineering behind the car is superior to other automobile manufactures (I've definitely been drinking the Deutschland Kool-Aid). On the other hand, my extended family all (literally on my mom's side) drive Volvos, so it really is just a matter of personal preference. The one thing I would advise is to find a brand/model that has excellent resale value in the used market. For example, even if a BMW is 10 years old and has 130,000 miles on it, some kid going to college will think it is "cool" and will want it. It has been my experience that there is always a strong market for used BMWs selling around blue book value. This was not the case for Mrs. Frugal Franco's fancy-pants VW New Beetle, which had to be sold for 20% below blue book value last year.

The next thing I do is search for cars online. My favorite places to look for used cars are Craigslist, Autotrader, and Cars.com. I typically look for private seller listings because I'm always afraid that all the used cars at dealerships are lemons. I mean, why else would someone trade their car in at a dealership for the "trade in value" instead of selling it to another person? I'm sure there are a good number of people out there who aren't as frugal as me and turn the car in to avoid the hassle of having to sell it, but I still can't get past the lemon bias. Not to mention there are few things I can think of that are more unpleasant that haggling with a used a car dealer (okay, there a lot of things, but it's still not something I enjoy). I have only bought one car from a used car dealership and it is something I'm not likely to repeat. I have yet to try the "new" used car experience at places like Carmax where there is a set price based on the blue book value with no haggling. It sounds like a great concept so I would recommend this to people who just can't bring themselves to buy from a private party. For those that are willing to deal with a private party seller, I highly recommend the following:

• Look for single owner cars. This is the number one thing to look for when buying a used a car. The original owner remembers what that car looked and felt like when it was brand new. They also remember how much money they had to pay for it and therefore do everything possible to keep it looking and running like it did the first day they bought it. There are always exceptions to the rule, but you should be able to spot them as soon as you look at the car.
• Ask for maintenance records. If you are lucky enough to find a good deal on a single owner car, chances are they have all the maintenance records on the vehicle. Check to see if service was done at the dealership after the warranty expired (not a deal breaker but a good indication of how the owner treated the car) and if all the scheduled maintenance was done. On a side note, once I own the car, I hardly ever take it to the dealership and try to avoid the "routine maintenance" if everything is running smoothly, but when you are buying a car, these things are always nice to have (a double standard...I know).
• Push back the clock. A lot of people want to have the latest body style in whatever model car they end up choosing, but the truth of the matter is that manufacturers go years (usually 5-7) without making any major alterations to the way the car looks. I would target the earlier years of a model's 5-7 year lifespan and look for the "older" cars with low mileage and excellent maintenance.
• Take it to the mechanic. This one is really a last resort that I sometimes employ. If you find a car that meets the first two criteria, this step may be unnecessary. If something just doesn't fell right about the car or the person selling the car, then definitely take it to a mechanic or just walk away all together. The $100 you spend having a mechanic look the car over can be recouped in the negotiation phase if anything wrong is found on the car. Running a Carfax report is no substitute for having a professional mechanic look over the car. Not to long ago, I was helping my younger brother buy a car. We found a sweet deal on a convertible BMW that had a clean carfax report. Something didn't feel right about the seller, so I made him take it to a mechanic for an inspection. When the mechanic punched in the VIN number it came back that the car had been salvaged and was "reconditioned." Needless to say, the deal was off and Carfax dropped out of Frugal Franco's favor.
• Always ask why the person is selling the car. While we are on the subject of sketchy used car sellers, depending on where you live there is a growing contingent of semi-professional used car flippers. Typically, this person finds cars at auctions or that have been salvaged, does a shoddy job "fixing" them up, and then prices the car slightly below the market to attract some buyers (a Frugal Franco trap if ever I saw one). When you ask this person why they are selling the car, some will be honest and tell you they flip cars while others may tell you they are moving out of the country or some bogus story along those lines. I would highly recommend NOT purchasing a car from these types of people as the risk definitely outweighs the reward.

Remember, a car is not a good investment, so the more one can separate the need (a mode of transportation) of a car with the desire (I sure would look cool in that new car) to own one, the better off that person will be. For those that still can't get past the new car high or driving without a warranty, may I suggest looking for certified pre-owned vehicles or purchasing a used-car warranty (I'm unfamiliar with these, but think car insurance companies offer them). A certified pre-owned vehicle allows one to skip the worst part of the deprecation curve, while still enjoying a new(er) car with a manufacturer warranty. This is still a spendy option if you have to finace it, but it's the next best thing.

Ciao,

Franco

eCoupons

A quick note for those that like to shop online (and for those that don’t, you are not fit to wear the “frugal” name). Always remember to do a quick search for online coupons before you checkout. I was shopping at Sports Authority today after I found out that my local Sport Authority would still string my tennis racket for free if I bought my strings off the website. Normally, I purchase the strings at the store, but the website had a closeout deal on $18 strings marked down to $5 (needless to say, I bought a couple). I also found some fancy new Adidas golf shoes (on sale…of course) and an inflatable pool for the Frugal Family to escape the summer heat. Before you knew it, I had run up a triple digit bill. As I was getting ready to checkout, I noticed the little box for coupon codes. A quick search for “sports authority coupons” directed me to Coupon Cabin where I found a 15% off coupon. A mouse click later, I was back at the Sports Authority checkout with a slightly fatter wallet for my troubles.

Ciao,
Franco

Cost of a new car

Buying a car is a difficult process and one that most people do not take lightly. There are so many variables and tradeoffs to consider…foreign vs. domestic, flashy vs. practical, new vs. used, cup holders vs. a car that parks itself (or something like that). Let’s explore the most important part (or at least it should be) of the decision making process…cost.

A car is the single most coveted pleasure that defines one’s status in life…at least that’s what one would believe if they spent any time watching TV, reading magazines, listening to the radio, or glancing at the occasional billboard. Billions of dollars are spent every year to enforce this message and burn it into our collective psyche. To sweeten the deal, car manufacturers even make this piece of the “American dream” available for no money down and an easy monthly payment. How nice of them.

But after the new car high has worn off, what is left? The answer is a huge old liability. Notice that I said “liability” and not “asset.” It’s not an asset because…well…you don’t really own it yet. But even if a car is owned outright, I would still argue that it is a liability and not an asset because A) it doesn’t produce a cash flow (unless you are running a fly-by-night taxi service in your new whip) and B) it can’t be sold for more than what it was purchased for (unless you are buying a rare classic or something of the shorts).

Depreciation is no one’s friend when it comes to being an automobile owner. Take a quick look at this website (granted it’s a British website, but I’m sure the Queen won’t mind us dropping in for a visit) to get an idea of how quickly the value of that “new” (for a working definition of “new” vs. “used” please refer back to my previous post) car evaporates. In the case of my car (or the new equivalent of my car), over 30% of the car’s value is lost after the first year. The cost of owning a new car is not just the monthly payment, but also the value lost by the newly acquired liability as it is used. A bit of a double whammy if you ask me, but wait…it’s gets worse. :)

At the fear of being called a Debbie Downer, I’ll throw a third whammy out there for consideration. That “easy” payment that you are making every month is incurring an opportunity cost. The money that is going to pay down the debt on the car could be used for other purposes. At the very least, it could be sitting in an online savings account making 3%-5% interest. The income and appreciation that is not being earned on an investment opportunity to make room for that shinny, four wheeled liability is the opportunity cost. Not to pour salt in the wound, but it gets even worse for those who forgo paying down their high interest rate credit cards in order to make the monthly car payment. In that case, the opportunity cost is the interest paid on the credit card debt, which we all know is extremely high.

There are definite advantages to owning a new car, the largest of which is the warranty. I’d love to never have to pay the mechanic every time my car broke down, but how much is this peace of mind worth and how much does it really cost (i.e. the triple whammy). The real question to ask onself when considering a new car purchase is "how much am I willing to pay for the perks (warranty) and the new car high (giving into the man's propaganda)?". Too often people spend beyond their means to purchase (or worse yet finance) a car. This needs to stop! There are plenty of reliable, nice (enough) cars to be purchased for a fraction of their new sticker price.
I use the next post to discuss some these options and a list of do’s and don’ts for the used car buyer.

Until next time…ariva derche.

Franco

Craigslist & eBay

This post is really just an amendment to my last post as further elaboration is needed on the glory that is ebay.com and craigslist.com. Both of these venues offer great opportunities to get lots of stuff on the cheap and each has a unique advantage over the other.

Craigslist
The history behind Craigslist is quite interesting as it grew out of one man's (Craig, believe it or not) house in San Francisco by word of mouth. The site has remained true to its grassroots with a pure text based website (no annoying, flashing banner ads), a skeleton staff of 24 people, modest profitability, and a refusal to sell out to the man (a la ebay…which actually acquired a 25% stake in Craigslist when one of the former principles decided that selling out to the man was the way to go).

Depending on where you live, Craigslist can either be a feast or a famine. It is most popular in larger, metropolitan areas, especially on the west coast, as these were the first markets targeted during Craigslist’s development. Because of the small staff and communal feel, the site is set up to be self regulated as posts are monitored by the people who use the service. I tell you this to let you know that fraudulent activity can and does occur through people abusing this resource. Use your intuition/common sense when it comes to dealing with other people on the phone or by email. If it doesn't feel right for any reason, don't go through with it.

I like to use Craigslist for big ticket or heavy items that will cost a fortune to ship on ebay or for anything that I want to inspect (like a car) before I buy it. As a rule of thumb, items on Craigslist typically go for less than they are listed for as most buyers have the “garage sale” mentality (e.g. even though a used book is being sold for next to nothing, the buyer wants to get it for half of next to nothing). If you are planning on selling on Craigslist, keep this in mind and try to price your items slightly higher than what you want to sell them for (assuming you don’t price yourself out of the market in comparison to other similar products on Craigslist in your area). Some hard to find or in demand products will go for the asking price if they are priced well, as I recently found out when I purchased a premium used lawnmower and weed eater last summer.

Since Craigslist is targeted at local markets, make the effort to meet the person on the other end of the transaction face to face. This will greatly reduce your chances of getting cheated out of your hard earned money, like the time that Kwame guy from Ghana promised to shares his millions with you. It will also give you a chance to inspect whatever it is you are buying. When you set up a meeting place, make it a neutral site like a shopping center parking lot as it is not recommended to invite strangers over to your house (or visa versa).

eBay
Ebay is a great place to shop online. It has become an ecommerce Mecca for millions of individual business owners and average joes looking to bid on whatever suits their fancy. Unlike Craigslist, ebay listings are monitored, payments are tracked, and members are rated by each other on each transaction. Also unlike Craigslist, ebay is a publicly owned company who is out to make lots of money. Because of this subtle difference, selling on ebay is a bit more expensive than the free option that Craigslist offers.

When you buy things on ebay, always check the seller ratings. Look for sellers with a high overall score, a high positive feedback percentage, and the ability to accept paypal, which enables ebay to track your payments. These three things will greatly reduce your risk of coming up empty. If you are making a larger dollar purchase, there are options such as Escrow.com who will charge a fee to act as an independent third party in the transaction. The third party will hold your payment until they receive confirmation from you that the purchased item has be received at which time they will then release your funds to the seller (as a side note, in all my years of using ebay I’ve never made a purchase that was large enough to warrant such a service).

I typically use ebay for smaller items that are easy to ship. Just the other day I bought a new A/C adapter for my notebook computer for a third of what it would have cost me to buy it direct from the manufacturer. It’s always good to compare the cost of things on ebay to what it would cost to buy the same product from other online retailers. Amazon.com is always a good place to check and you can use resources like Google's Froogle or Yahoo Shopping to compare prices at a variety of smaller online retailers.

I’ve been using both ebay and Craigslist for multiple years and have only been stiffed once on ebay to the tune of $15. I would definitely recommend them to any bargain hunter out there looking to save some coin.

Ciao,
Franco

Buy Used

How long do things stay new? It depends on your definition of "new," but technically it is the moment right before you get your grubby little paws on it. So if that's all it takes to label something "used" instead of "new," people should consider buying discounted used products rather than their fully priced brethren. Sure, there is a whole litany of things that you don't want to buy used (underwear, mattresses, and bathing suits come to mind), but many of the larger ticket items people purchase can be obtained at a bargain price in the used market.

Back in the day, if you wanted a used TV you had to either comb through the newspaper to find the weekly garage sales or drive to the "affluently challenged" part of town to find a dilapidated old building with bars on the windows where a guy named Snake sat behind the counter with jailhouse tats on his arms, a cigarette in one hand, and a shotgun in the other making you an offer you can't refuse (literally!). Well thankfully, gone are the days. The internet has brought every corner of the globe closer together. Now it is easy to find almost any used item you could possibility want either locally on Craigslist or nationally on eBay.

If you don't mind not always having the “latest and greatest,” there is substantial money to be saved by being slightly behind the technology curve. As a rule of thumb, if I can find what I want new and on sale (a real sale, not the 10%-20% variety), then I typically don’t bother with used products. But some things are hard to find on sale, so the used market offers another avenue to get what you want for a fraction of the sticker price. Here is a list of a couple things ol’ Franco loves to buy used:

• Cars. This is bar none the biggest money saver when it comes to buying used instead of new. There is so much to cover here that we’ll hit it up in a future post.
• Golf clubs. Every three to four years I like to change out my clubs for newer used ones. If you have a half decent set of clubs already, you can sell your current set and buy a newer, used set for a couple extra hundred bucks instead of the grand plus you would have to drop on a brand new set. If you like to try things before you buy them, utilize the many demo days club manufactures will run at golf courses or driving ranges in your area.
• Baby Stuff. Let’s face it…babies grow up fast and it can be very expensive to keep them clothed and happy. Mrs. Franco and I just celebrated the birth of our first child in December and since then my house has turned into a veritable treasure chest of baby stuff. We received a lot of clothes from friends and family, and the rest we bought second hand (that’s a fancy way of saying “used”) from a local consignment store that was going out of business. As far as car seats, jumpers, cribs, changing tables, play pens, and high chairs go, we got them all used from people in our area off of craigslist.com. It may behoove you to check the recall list on any used products you are considering buying.
• Furniture. Lots of cool furniture can be obtained used for a fraction of its original cost. As long as it still looks good and serves its purpose, I say go for it. Furniture is heavy to ship, so stick with the local used markets rather than ebay (unless you do a localized search).
• Tools. Every man loves tools (even if we don’t “need” them) and tools can be expensive. I like to buy quality, name brand used tools instead of cheap, new knock-offs. It may just be personal preference, but it allows me to experience the quality of a good tool for the price of a knock-off.
• Wedding Dress. This one is obviously a “bonus pick” from Mrs. Franco, but she makes a good point – a weeding dress is something you will only wear once in your life, so it doesn’t make sense to spend thousands of dollars on a new one if you can find a used one you like. They key is to find one you really like…just don’t get caught up in the fact that it is “used” instead of “new”. After all, it’s new to you ;).

Things I don’t buy used:

• Computers. There are so many deals to be had in the new computer market and computers become obsolete so fast, that it doesn’t make sense to buy them used.
• DVDs. Just say no…rent don’t buy. Want to watch it more than once…rent it again! It just doesn’t make sense to buy DVDs with rentals being so cheap (Netflix, Redbox) and video on demand picking up steam.
• Books. Okay, I do buy used books (and sometimes new) but 9 times out of 10 I use the library. Your tax dollars are paying for those books, so you might as well use it.
• Clothes. This one actually can go either way. I typically buy new clothes off the sales rack or better yet the clearance rack, but if you like to treasure hunt, some pretty sweet vintage digs can be found at the Goodwill, Salvation Army, or local consignment store. Also, keep your closets clean by donating your used clothes to non-profit organizations and taking the tax deduction from Uncle Sam.

That’s all for tonight, but more to follow on buying used cars and budgeting as previously promised.

Ciao!
Franco

Eating Out

Look...everyone likes going out to eat, so here are a few tips that Frugal Franco likes to use to make the experience a little easier on the wallet.

1. Drink water (the free kind). This is the number one thing I would recommend for people when they eat out. When you order a drink at a restaurant, you end up paying at least 4 times as much as it would cost you to make the drink at home. Whether you are talking about soda, juice, ice tea, or "adult beverages," drinks at a restaurant have the highest mark up of any product on the menu. That is why all good waiters/waitresses will ask you "anything to drink?". Discipline the pallet to enjoy that tasty beverage after the meal in the comfort of your own home for a fraction of the cost. My rule of thumb is that I don't order products at a restaurant that I can replicate at home by purchasing them from the grocery store (a coke is a coke, but a pizza is different everywhere you go).
2. Take advantage of the lunch special. Lunch specials are great because you typically get the same great food for a much more reasonable price than dinner. There is a restaurant close to where I work that is very nice (white table cloths, coat check, multiple wait staff per table) that serves an excellent Angus beef burger with gorgonzola cheese for $10 at lunch, whereas it would be almost impossible to get out the restaurant at dinner for less than $25 a person.
3. Split a meal. Portions seem to be getting bigger and bigger while everyone is trying to keep their waste lines from following suit. Splitting a meal with someone is an easy way to keep the wallet and the waist line happy. If your not worried about the waste line, split a meal and a dessert or appetizer if the price is right ;).
4. Use the Entertainment book. The Entertainment book is packed full of BOGO ("buy one get one" for those that are new to the game) coupons from a variety of local restaurants. I especially like using the Entertainment book to try new restaurants in my area that I wouldn't typically frequent. Some of my favorite restaurants today were found through the Entertainment book. Depending on where you live, there may be a good number or a small spattering of restaurants close by. Entertainment books are usually grouped by large population areas, so you may not want to pick one up if there are only one or two restaurants within an hour's drive of your house.
5. Budget how much you want to spend on eating out per month and stick to it. Budgeting will most likely be my next topic as it is the essence of frugalness. Keeping a lid on discretionary spending (like eating out) can really help the old bank account and put you on the Frugal Franco track -- save, invest, & give back.

One last thing about eating out before I sign off…don't try to save money on the bill by stiffing the wait staff. I'm not an over generous tipper by any stretch of the imagination, but a fair tip (15%-20%) is expected for fair service. Personally, i prefer the European model where the wait staff is paid a decent wage, the price of the food (including taxes) and service is included in the menu price, and a gratuity is something that is left for exceptional service. But until the "Colonies" decide to adopt this model, patrons will continue to be REQUIRED to pay the salaries of the wait staff. Tipping here in the US really isn't optional, so don't ruin some guy/gal's day by short changing them on a bill.

Ciao!
Franco

Grocery Shopping

There is so much to say about this topic that I don't know where to begin. I'll start with a time sensitive deal that everyone should take advantage of if possible. Many grocery stores in my area (and I believe around the country) are offering a 10% bonus when you put your stimulus package (wait...this is spose to be a kid friendly blog) rebate check toward an in store gift card. You don't have to cash the physical check at the store. Instead you can put it on your shiny new cash reward credit card (that you had overnight delievered to you after reading yesterday's post...very un-frugal of you) and save up to an additional 5% (depending on the reward structure). The Mrs. and I went hog wild with this one since grocery shopping is something we have to do every week. I wouldn't recommend buying more credit that you can easily pay off when the credit card statement comes in the mail (or email) at the end of the month. Remember, if you're going to use a credit card, make sure you pay it off IN FULL every month. Getting a couple percentage points back on all your purchases is great and all, but it's never worth the double digit interest charges the credit card companies charge you if you carry a balance.

Alright, let's move on to how to grocery shop. Remember how I originally told you how much I love a good deal...well this holds true at the grocery store too. Some people might be thinking, "great, Franco is going to tell me how I need to read through the paper every day and clip coupons." Let me tell you that nothing could be further from the truth. Time is a valuable resource. Some people's time like my dentist are appartenly more valuable than others (your's truely) as he consistently likes to make me wait in his waiting room (well that's what it's for), do 10 minutes of actual work on my mouth, and then slap me with a several hundered dollar bill...but i digress. I couldn't think of many things I'd rather NOT do than pour through the paper clipping coupons to save an extra 50 cents on my next puchase of Spinach Souffle. If clipping coupons is your thing, than more power to you, but if not, let me tell you another effective way to save.

All grocery stores run weekly specials. Some of the specials (usually on the front or back pages of the ciruclar) are much juicer than the "sucker's special" when they drop the price of shaving cream from $4 a can to $3.90. When you go to the grocery store, try to make a list of staples that you absolutely need (e.g. milk, eggs, bread, etc...) and then leave plenty of room for creative "extras." The non-staple purchases should center around your favorite products that are on sale that week. If you have extra storeage at home, stock up on your favorite items when they go on sale. I'm a bit embarassed to admit it, but I tend to stock up on the breakfast Lean Pockets whenever they get marked down to 4 for $6.00 and after watching this hilarious bit, who can blaim me ;). If you want to take it to the next level, many stores will match their competitors ads, so instead of criss crossing the city to hit up all the deals, just go to your favorite store and see if they will match all the prices. This type of grocery shopping gets adicting as Mrs. Franco and I reguarily compare receipts to see who's percentage savings are the highest (I smoke her almost every time ;) ).

Lastly, let me leave you with this parting thought. If you are willing to put in the time to cook your own food at home, you can eat really nice meals for about the same price that you would pay for a standard lunch and a drink at any sit-down (where did that saying come from and how does one find a "stand-up" one?) restaurant. As a quick example, you can buy an entire beef tenderloin from Costco for about $8-$9/lb. Let's assume you want to eat a standard 8 ounce (half pound) steak with a side of asparagus and a potato. The asparagus and potato will probably only run you another $2-$3, so your grand total is somewhere in the ballpark of $6-$7. Put that with a bottle of "good enough" wine in the $8-$12 range and your are talking about a great meal for right around $10 (unless you are bit of a lush and drink the whole bottle of wine). It's hard to get out of any restaurant...even Denny's...for under $10 per person. The cost of eating out (which I LOVE to do!) is a whole nother post. The key is to plan your portions and use all your ingredients before they go bad. All the money you saved on groceries can quickly get flushed away when food is not consumed and has to be thrown out.

Ciao,
Franco

Credit Cards

Wouldn’t you love to get paid for doing all your everyday tasks? Take a shower in the morning…$3, brush your teeth…$2, take the garbage to the curb…$4. Alright, so my analogies aren’t the best (fair warning -- I love analogies), but hopefully you get the picture. But this type of opportunity is available to almost everyone through the use of no annual fee, cash back reward credit cards.

I use credit cards for two reasons 1) they are super convenient & 2) I get paid to do so. Credit cards can be dangerous if used improperly, so if you don’t trust yourself to pay of your balance IN FULL every month, than read no further. For those that can handle the responsibility, I highly recommend doing the following:

1) Figure out how much of your spending can be charged on a credit card every month
2) If possible, categorize your spending into broad buckets (e.g. gas, groceries, utilities)
3) Visit one of the many credit card comparison sites on the web to find a list of the best cash back cards.

So how do I know which card is the best? The answer depends on how much you spend. The only way to know for sure is to “do the math” by figuring out how much you spend per category (since some credit cards pay higher bonuses for certain things like gas and groceries) and then multiply your spending by the reward structure.

If you are a big spender, look for a card that does not cap the rewards paid per year. These cards typically have a tiered reward structure so it may take a couple months worth of spending to break into the juicy top tier rewards. Personally, I like Blue Cash from American Express because they offer 5% cash back on all supermarket, gas station, and drug store purchases along with 1.5% back on all other purchases once you break into the top tier (spending over $6,500 on the card annually). With rising gas and food costs, this these types of rewards are money (literally)! I always carry a backup card (usually a Visa or MasterCard) as American Express isn’t “everywhere you want to be.” This is a bit of a hassle, but worth it for the extra dough in my opinion.

If your not a big spender (less than $1,000 per month), it may take you too long to work up to the top tier, so a simple non-tiered reward structure would be better. One of my favorite (and my backup card) is the Chase Freedom card. It offers 3% back on your top 3 everyday spending categories and 1% back on all your other purchases. Your top 3 categories may not be gas, groceries, and drugstores, so you get the added flexibility of juicier rewards on whatever you spend the most.

Always remember to read the fine print as important information like reward caps, tiers, and exclusions are hidden there. For example, the maximum bonus reward on the Chase Card is $12 per month. So if you go hog wild and spend $2000 on a vacation one month, you won’t get the full 3% back on the entire purchase. If you don’t like reading the fine print or get confused, just call up the credit card company and the nice representative will be sure to read you a canned response of their computer screen ;).

Finally, one last point before we shut her down for the day, cash is king. There is still a contingent of folks who willingly (I know…it’s hard to imagine) sign up for mileage plus cards and PAY the credit card company for the privileged to do so. I’m not sure how many of you have actually tried to book an airline ticket using miles, but gone are the days of the 25,000 mile ticket. Okay, sure, if you want to fly at 6 am from Dallas to Chicago on a Wednesday, that route might be available (but I’m not promising anything). If you want to fly to non-hub cities or during regular waking hours, be prepared to fork over 50,000 miles for your troubles. Assuming the average ticket cost $500 (high in my estimate, but work with me here), you miles are worth exactly 1 cent per mile. That doesn’t even factor in the annual fee on the credit card or any booking fees or taxes the airline might try to nickel and dime you for. So the in the end, you are paying a credit card company to give you (in essence) 1 cent for every dollar you spend when you could be getting this or better for FREE with the cash rewards card. So my advice is that you fire the mileage plus card, start collecting cash, and use Kayak and the money you’ve earned to book your next flight.

Frugal Regards,
Franco