The Incremental Life

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“Same As Cash” Offers Are NOT the Same as Cash

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Same As Cash Offers

I’m sure you’ve seen same as cash offers in stores or on television commercials. We’re bombarded with 90-days same as cash, 6 months same as cash, and even 12 months same as cash offers!

Seems too good to be true, right? Well, when you have to stop and ask yourself, “What’s in it for the lender?” that’s a good indication that you’d better scratch beneath the surface and learn what’s going on.

How Same As Cash Offers Work

It’s tempting to walk into a store and buy a new computer or furniture suite with a same as cash offer. Sure, you could wait and save up the money—especially for an item you don’t need right away—but with an offer like this why wait?

The problem is that when you learn how these offers work, you realize that it’s not even close to being as good a deal as paying with cash. In fact, it’s almost as if it’s an enticing snare.

That’s exactly what it is because lenders know that nine out of ten shoppers won’t manage to pay the debt off in time.

Let’s say you purchase a new computer for $1,000 with a 6 months same as cash deal. Your plan is to pay it back within the six-month window to avoid the interest payments. That sounds like a good plan, but if you’re not careful, you’ll get caught and end up paying a whole lot more.

Now, keep in mind that I’m not talking about the type of deal that offers no payments and no interest for a certain period. Same as cash offers usually require you to make a minimum monthly payment from the outset, it’s just that they defer the interest for the duration of the promotional period.

So, to pay off your new computer inside the six-month no interest window, you’d need to pay at least $167 per month. Your minimum payment may not be equal to this, so you’d need to pay the extra in order to own your new computer free and clear.

If you somehow miss a payment in the middle, the debt immediately converts into a high-interest ball and chain somewhere around 18-23%—and some of these same as cash deals can have rates as high as 40-50%!

Not only that, but the lender will immediately assign all of the interest that you would have had on your previous payments. This means that you suddenly owe not only the remaining balance AND the recurring monthly interest, but ALSO any interest you would have incurred from the very beginning of the loan.

Even if you never miss a payment, the above scenario remains true if you’re unable to pay off ALL of the loan within the promotional period. So, if you were only able to pay $975 of the total $1,000 you owed, then you’d end up getting billed for the remaining $25 PLUS all of the interest from the beginning of the loan period.

How to Avoid Same As Cash Offers

This sounds like a no-brainer, but the best way you can avoid getting trapped by a same as cash offer is to avoid them altogether.

If you think about it, most of the products you’ll see offered in conjunction with same as cash deals are items that you can probably wait on purchasing. Big ticket items such as furniture, entertainment systems, and computers are not needs. So how should you purchase such items?

With cash.

Seriously, save up the money and pay cash. If you find yourself tempted by a same as cash deal because you think to yourself, “I can come up with that much money in that amount of time,” why not actually take that time to save up the money instead.

Listen, life happens, which means that you may be in the position now to make payments without fail and own that item free and clear before time runs out, but what happens if you get sick and miss work, or get in an accident, or have a family emergency?

Learn to delay gratification and, therefore, eliminate risk. Be patient and save up the money.

Once you’ve got your cash-in-hand, take your shopping to the next level and see if you can find an even better deal than you first saw in the store.

Jeff M. Miller (@jmarkmiller)

I’m Jeff M. Miller, and I help ordinary people who are stuck in a rut change their behaviors so they can be extraordinary. I’m an entrepreneur who retired from my full-time job in my early 40s to work from home. I’m a financial counselor, life coach, graphic designer, and passionate believer in helping others improve their lives a little more each day.

http://theincrementallife.com

Stop Letting First-World “Needs” Keep You From Your Financial Goals—5 No-Brainer Cuts for Your Budget

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5-no-brainer-cuts

I’ll confess, this post is written somewhat from a feeling of frustration. I’ve read a few posts lately—on some really great financial sites that I enjoy and admire—about how people can make a deep sacrifice and cut their eating out in order to find some wiggle room in their budget.

Since when did eating out become a necessity rather than a bonus? How is cutting eating out a sacrifice?

Now, for the record, I don’t consider running through a drive-through and getting two or three things from the dollar menu “eating out” as long as you’ve got the money in your budget somewhere. To me, eating out is when you’re spending unnecessary money for a meal that would be far less expensive to eat at home, or when you choose to go out when you could have eaten at home.

I’ll ask again. When did eating out become a necessity rather than a convenience or special treat?

We shouldn’t feel guilty for the great blessings we’ve been given, but when you’re working toward a goal like getting rid of debt it might help to keep a broader perspective. There are people in this world who truly struggle just to meet their basic needs, so let’s not call cutting a few first-world privileges a sacrifice.

Let’s look at five first-world luxuries that should no-brainers to cut from your budget when you’re working toward a greater financial goal.

5 No-Brainer Cuts for Your Budget

  1. Eating out—eat at home, carry lunch to work, and keep some protein bars or snacks handy for when you’re away from the house and get hungry.
  2. Movies and other entertainment—you can still have fun but in a frugal way like renting a movie from Redbox or an online streaming service like MGo or Vudu ($2-5 total rather than $8-12 per person).
  3. Cable or satellite subscriptions—cut the cord and find streaming alternatives or figure out something better to do with your time instead of sitting in front of the TV for several hours per week.
  4. Deal Shopping—don’t fall prey to buying something just because it’s on sale. Determine if you really need it, and then budget it for it.
  5. Name brands—whether clothing or food, think twice about the real value of a name brand over a store or generic alternative.

There are dozens of other luxuries we could talk about cutting, from cell phone contracts to high car payments.  As you can see from the list above, even if we cut common purchases from our budget we’re still living a relatively luxurious life. Don’t make the mistake of labeling conveniences as needs.

Don’t misunderstand me. This isn’t some sort of complaint about the “evils of becoming rich.” I want you to be rich, just don’t try to live like it when you’re not!

I’m a pretty firm believer in the idea of splurging on a regular basis as a reward for good behavior—but even then you should make sure you’re covering that splurge in your budget.

I don’t think there’s anything wrong with spending money to eat out or do fun things, but please let’s stop acting like cutting these things from our budget is a sacrifice.

Jeff M. Miller (@jmarkmiller)

I’m Jeff M. Miller, and I help ordinary people who are stuck in a rut change their behaviors so they can be extraordinary. I’m an entrepreneur who retired from my full-time job in my early 40s to work from home. I’m a financial counselor, life coach, graphic designer, and passionate believer in helping others improve their lives a little more each day.

http://theincrementallife.com

Do You Have Vacation Budget? It’s Not Too Late to Start

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Check out this video from Dave Ramsey about why you can’t take a vacation. I’ll add my own comments below.

[If this video is unavailable, please click here.]

Act Like Grownups and Pay Cash

So what are some ways you can fund your upcoming summer vacation without using credit cards? It’s not too late to set aside a good chunk of cash. Here are a few ideas to get you going.

  1. Make significant temporary cuts to your budget. Find $10 here and $50 there that you can cut from your spending in the weeks to come. Each cut may not seem like much, but added altogether you might be able to come up with a few hundred dollars.

  2. Use your food budget while you’re gone. Let’s say you’ve budgeted $800 per month for food, but you’re going to be gone on vacation for 2 weeks. That’s about $400 you can shift from your food budget directly over to your vacation stash.

  3. Have a garage sale. You’re probably already planning to do some sort of garage sale this spring anyway, so get one together soon and use it to add money to your vacation budget.
    TIP: If you’ve got young children, buy some bottled water and keep it on ice during your garage sale. Have your kids sell the water for $1 a bottle to customers so they can earn more spending money for the vacation. You’ll be surprised how many people will buy water from a cute kid on a hot day.

  4. Save money from non-essential budget categories. Save up all your restaurant, entertainment, and blow money budget categories from now through your vacation and apply it to your trip budget.

  5. Find a temporary additional job. This may sound tough, but you’ve probably got more opportunities available to you than you think. Are you any good at home maintenance and repair? Could you spend your weekends cutting lawns and trimming bushes? Are there people in need of having junk hauled away? Look for opportunities to generate a little extra income over the next few weeks.

  6. Plan your vacation around the cash available. Maybe you can’t take the family to Disney for two weeks with the cash you’ve saved up, but you can still do something fun and special. Remember, the real purpose of vacation is to get away, rest, have fun, and spend time together as a family.

  7. Look for ways to save money on your vacation. There are tons of ways to save, from finding coupons or discounts for restaurants, buying hotel and entertainment deals from Groupon or Amazon Local, or even getting a hotel room that has a kitchenette so you can buy groceries and eat fewer meals out at expensive restaurants.

  8. Set specific spending limits. When you do go out to eat, set limits on how much each person at the table is allowed to spend. (Take leaving a good tip behind for your server into account.) If you’re going to give family members spending money, set a limit and stick to it. Don’t let emotions get the best of you and blow your budget by buying too much touristy stuff.

What are some ways you save money for and during your vacations? Please share in the comments.

Jeff M. Miller (@jmarkmiller)

I’m Jeff M. Miller, and I help ordinary people who are stuck in a rut change their behaviors so they can be extraordinary. I’m an entrepreneur who retired from my full-time job in my early 40s to work from home. I’m a financial counselor, life coach, graphic designer, and passionate believer in helping others improve their lives a little more each day.

http://theincrementallife.com

Tax Day Has Come and Gone, Now What? Preparing Now for Next Year

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Tax Day Has Come and Gone, Now What?

Tax day has come and gone for the year, and many of you are breathing a sigh of relief. Now you plan to kick back and enjoy the next twelve months and put taxes out of your mind until next April.

That’s a huge mistake.

If you want to make the most out of your yearly tax routine, you need to put together a game plan for next year. Here are the minimum steps you should begin taking today to be better prepared for your taxes next year.

Hire a Professional

Unless your taxes are simple enough to file using a 1040EZ, you will likely be well-served by hiring a professional to prepare your taxes for you. Chances are you’re already paying for tax preparation software, which means you’re out of pocket about $50 anyway. An informal survey on Dave Ramsey’s Facebook page revealed that the average return for self-filing individuals was $1,824 while the average refund for filers who hired a professional was $2,615. As you can see, the tax pro more than paid for themselves.

Tax software often leads users astray by not having any sort of checks and balances to ensure you’ve entered all your information correctly. The software doesn’t know how to apply all the deductions and credits for which you qualify—the best it can do is offer you options based on your input. Sure, tax software has gotten better and more intuitive over the years, but it cannot beat a professional with a working brain.

When you consider that a seasoned tax pro understands the intricacies of current tax code and can not only get you the largest return possible but also ensure that your taxes are filed properly, you begin to understand the benefits of paying their fee. Don’t overlook the added bonus of not spending hours and hours working on all that paperwork yourself—that’s what you’re paying the pro to take care of!

If you’re an entrepreneur, you’ll discover that a reputable tax pro is worth their weight in saved money. Why wade through all that red tape on your own? A professional knows how to find all the deductions and credits for which you qualify while ensuring you meet your legal obligations.

Don’t already have a tax pro in your corner? Ask your friends for recommendations, or check out one of Dave Ramsey’s Endorsed Local Providers.

File Your Taxes Early

Why wait until April 15 every year to file your taxes, especially if you’re going to hire a pro? Starting now, get a file folder and begin collecting all the relevant information you’ll need for next year’s taxes—things such as investment income statements and mortgage interest statements. If you plan on itemizing deductions, you’ll need to collect receipts for your charitable donations, child care expenses, college expenses—basically anything and everything your tax pro is going to need.

After the first of the year, place your W-2s and 1099s in your folder, along with any other relevant documents. Remember, most of your tax documents are required by law to be in the mail and headed toward you by January 31 each year. If you haven’t received all your documents by mid-February, you need to get on the phone and find out what’s going on.

As soon as you’ve received all your statements, schedule an appointment with your local tax pro. Not only does this get it all done and off your mind sooner, it also gives your tax pro more time to work on your filing. A tax pro’s schedule tends to fill up fast in the last month or so before the deadline, so you want to beat the rush and get your paperwork to them as early as possible. Don’t forget that even the best tax pro is human, and no matter how hard they try or how experienced they might be, they’re also feeling the crunch in the weeks leading up to April 15, which means they’ll be more prone to mistakes.

Don’t Look Forward to Getting Anything Back

There was a day when I looked forward to tax season because I was pretty sure I was going to get a return. In my immaturity, my plan was to take that “unexpected windfall” and spend it. Tax refund day felt like Christmas.

The truth is that what really happened is I allowed the government to take too much money out of my paycheck—essentially giving Washington an interest free loan. Wouldn’t it be better to keep that money and use it to pay off debt or invest?

Think about it. The average tax refund in 2014 was $3,096, and is expected to rise higher every year. That’s $258 per month the average tax payer could be putting to good use rather than sending it to a government who’s more likely to waste it than use it wisely.

How much faster could you get out of debt if you applied an extra $258 per month to your bills? What if you invested that money instead? An investment of $258 per month over the course of 20 years would end up being worth between $120,721 and $249,843.

How’s that 0% interest loan you’ve been giving the government looking now? Of course, the key to using that saved money is to put it toward debt or savings, not use it to justify a new monthly payment.

Your goal at tax time should be to pay nothing and not get a big lump sum back from Washington. For starters, use the Withholding Calculator at IRS.gov to find out how to properly fill out your W-4 at work. Has your family situation changed since you last filled one out? It’s time for an update.

Better yet, sit down with your tax professional and ask their advice to find out how to best set yourself up to keep as much money as possible in your paycheck.

Say “No” to Shortcuts and Tricks

Don’t fall prey to taking shortcuts with your taxes. You’re only one audit away from major financial and legal difficulties if there’s anything fishy going on with your taxes.

There are also so-called “smart tricks” that some tax pros may try to persuade you to take advantage of—things like whole life insurance policies, annuities, and holding on to your mortgage. Sure, there are tax breaks available for some of these practices, but if you sit down and do some critical thinking you’ll learn that you’ll be far better off pursuing investment vehicles like matching 401(k) plans at work and Roth IRAs, or paying off your mortgage early and investing the savings. In the long run, you’ll earn exponentially more money from investing than from tax breaks.

What About This Year’s Refund?

If you received a sizable tax refund this year, what’s your plan? Instead of blowing it, why not stick it in a savings account at the bank while you take some time to consider the wisest use of your funds?

My advice is to follow Dave Ramsey’s Baby Steps, which means making sure you have a starter emergency fund of $1,000 saved up and then throw every extra dime at your debt until it’s paid off. If you’re out of debt, make sure you’ve got an emergency fund of 3-6 months worth of expenses, then look into saving for retirement and college, and paying your home off early.

Jeff M. Miller (@jmarkmiller)

I’m Jeff M. Miller, and I help ordinary people who are stuck in a rut change their behaviors so they can be extraordinary. I’m an entrepreneur who retired from my full-time job in my early 40s to work from home. I’m a financial counselor, life coach, graphic designer, and passionate believer in helping others improve their lives a little more each day.

http://theincrementallife.com