Saturday, July 10, 2010

Liz Pulliam Weston: Retiring overseas can stretch dollars - MSN Money

Monday, March 29, 2010

How rich friends make you feel poor

How rich friends make you feel poor
Why do we find it so hard to admit to a friend -- somebody who knows and accepts us -- that we live with financial constraints? Also: Ideas for handling the problem next time.

[Related content: savings, budgeting, spending, luxury, MP Dunleavey]
By MP Dunleavey
MSN Money
When I made plans to get together with a friend recently, money didn't enter the equation.

We had decided to splurge on some sort of beauty treatment together. (Guy readers: Imagine tickets to a great ballgame.) I suggested getting facials; she said she would do anything.

But when I called to book the treatments, I learned a facial would cost more than $100. Rather than saying so, I told my girlfriend I had a cold and suggested we get pedicures instead.

Doing your own pedicure
Well, I did have a cold. But I was also unwilling to spend 1/13th of my mortgage on my face. So why didn't I just say that?

I have friends who earn more than I do, friends who earn less. By and large, financial issues remain on the fringes of my relationships.

Except, of course, when money tension sneaks in and ruins a really good time, which is what happened in this case. Why does this happen?

5 ways to save on clothes
Go to Money Talks News

Lesson 1: Money tension builds from small acts of dishonesty.

First of all, I have several girlfriends who out-earn me, including this pedicure pal. She knows it. I know it. So what was I trying to hide?

In the salon, we splurged on $40 pedicures, which was fine; I was still within my mental budget. Until the manicurist "offered" us a supplemental lemon-verbena foot scrub.

(I love how these places "offer" you some deluxe add-on, as if you won't have to pay for it. Ahahaha.)

Once again, instead of being frank and saying, "No, thanks, this pedicure is expensive enough," I shrugged and looked at my friend, who shrugged and looked at me, and somehow that turned into "Sure, go ahead."

Lesson 2: You hurt only yourself.

Now I was furious with myself, irritated with Ms. Lemon Verbena and dreading the final bill. And guess what?

That dollop of lotion cost an extra $20. Twenty dollars. I could have bought five bottles of lotion!

I almost had a cow. But I was still trying to keep up appearances, so I played it cool.

That's because we had plans for dinner at a pricey place next door, which I had picked based on my mental budget and now felt obliged to stick with even though my mental budget was whimpering in a corner.

Then, another awkward moment: At the end of dinner, my girlfriend offered to treat me for my birthday. The only trouble was that my birthday had been three months earlier, so now I worried that she made this gesture because she'd heard my inner calculator go SPROING.

When you can't enjoy a friend's thoughtfulness, you know you have a problem.

Lesson 3: Maybe it's not them, it's you.

What I realize in hindsight: Money tension may seem to exist between you and someone else, but it's really your own private problem.

It wasn't my pal's fault that:

I wasn't honest.

I didn't communicate clearly.

I let my agitated state drive me to make choices that were outside my financial comfort zone, my values and my budget.

If I were to do the whole thing over again, I would have said at the start: "Hey, I don't want to spring for a facial. Let's get pedicures."

Being clear about my financial state at the outset would later have allowed me to issue a confident "no, thanks" when Ms. Lemon Verbena came around. I also would have felt more comfortable making a reasonable choice about dinner.

Was the underlying tension that my friend's income was so much greater than mine? Maybe.

Would you rather earn more than your pals?

Numerous studies have explored how our peers can alter our financial choices. One powerful influence is not how much money or income you possess -- known as absolute income -- but where you stand financially in relation to others (your relative income).

Cornell economist Robert Frank describes a fascinating thought experiment in his book "Luxury Fever." Subjects were asked to choose one of two situations:

Would you rather live in a world where you earn $50,000 but most people around you earn $25,000?

Or would you rather live in a world where you earn $100,000 but most people around you earn $150,000?

Economists have found that most people choose option A, even though they'd have double the income with option B.

In other words, many people would rather earn more than those around them, even if that meant less money in absolute terms -- because relatively speaking, they still would feel wealthier.

'I get you, and you get me'
It's uncomfortable, often painful, to feel as if you don't measure up. Or as if you can't keep up with people you like, admire or feel close to -- financially and otherwise. Friendships are usually founded on a core feeling of equality or at least parity: "I get you, and you get me. We have similar resources and values."

But different friends can evoke different sets of feelings. I've faced plenty of situations akin to this one, and I've had no trouble making my budget known or asking friends about their financial preferences.

Money tension, I think, stems from the dynamic within a particular relationship -- and what money or income has come to represent: how you view the life you have versus the life you want; how you see yourself versus how you want others to see you.
Communicate my preferences. It's not embarrassing to state your limits. Would you mind if a friend stated hers?

Earn $100 an hour -- clipping coupons

If you think going through fliers and finding discount offers just isn't worth your time, do the math. Coupons are back in fashion, and for good reason.

[Related content: savings, save money, coupons, online shopping, groceries]

By The Wall Street Journal

Clipping coupons hardly sounds like the subject of high finance -- or even medium finance.

Save a dollar on cat food, some detergent or a couple of boxes of cereal. Who can be bothered? Who has time?

Easy grocery coupons

A growing number of people, it turns out. And they're shrewder than it may at first appear.

The Great American Coupon is making a big comeback, thanks to the Great American Recession.

We redeemed about 3.3 billion coupons last year, a remarkable 27% leap from 2008 and the first annual increase in 17 years, according to a report issued at the end of January by Inmar, a coupon-processing agent. Online coupon use skyrocketed: Companies issued twice as many as in 2008, but redemptions rose 360%. The big upturn began in October 2008, just after Lehman Brothers went belly up.

It's easy to see why coupons had fallen out of fashion for so long -- and why so many consumers still ignore them.

You have to make time to visit a coupon Web site or collect the fliers from your mailbox, the supermarket or newspaper inserts. You then must sort through to find the ones you want, cut them out, stick them in your purse or wallet -- and remember to use them when you are at the cash register and trying to remember whether you bought everything on your shopping list and where you parked the car.

Average saving per coupon: just $1.44, according to the Inmar report.

But let's treat this low-finance topic for a moment the way we treat high finance. Let's subject it to the same math.

How long does it actually take to clip and use a coupon? Certainly the more you use, the less overall time you will spend per coupon, because so many of the costs -- getting fliers, sorting coupons and so on -- are generalized. Let's assume you spend a minute per coupon.

Saving $1.44 for a minute's effort is the equivalent of saving $14.40 for 10 minutes' work.

Hourly rate: $86.40.

Maybe this would be a good time to point out that the typical American working stiff -- anyone lucky enough to have a job right now -- climbs out of bed each morning, goes through the miseries of commuting and endures the daily grind at the workplace for about $20 an hour.

Furthermore, money saved with coupons comes with an additional benefit: Unlike money earned at work, it is tax-free. There are no payroll taxes, no federal or state income tax.

If your marginal tax rate were, say, 20%, you would have to earn $108 before tax to take home $86.40. If your marginal tax rate were 30%, you'd have to earn $123.

Few of us ever do this kind of math, because we tend to treat low finance differently from high finance and small sums differently from big ones. No wonder, even today, 99% of coupons are thrown away unused.

Yet finance isn't separate from the rest of our personal lives. For all of us, our scarcest resource is time. Putting the right value on it, and putting it to the most productive use, is a financial challenge as well as a personal one.

The individual amounts of money may seem small, but they prove the adage about tiny acorns and mighty oaks. Someone who saves $25 a week will save more than $100 a month and $1,300 a year. Over a lifetime that can easily grow to $100,000 or more, even after accounting for inflation.

If motivation is an issue, the next time you find yourself facing a stack of coupon booklets and fliers, don't ask yourself if you can be bothered. Try asking yourself if you'd like to earn more than $100 an hour for a job you can do at home -- while sitting on the sofa watching TV.