Costs associated with working full time

There are extra costs involved in working outside the home — gasoline and clothing are two common examples.

For me, I would also need to find someone to walk my dog every day. To keep my sanity, I would get a grocery delivery service and a cleaning person. The cleaning costs could vary from $50-$100/ week, depending on how much we needed. I’m estimating at the higher end because in the summer we would have to pay someone to do the weeding and lawn care that I do. If I am honest with myself, I know that I won’t pack a lunch every day, and I’ll end up eating out more frequently.

I spend a non-trivial amount of time making sure that we don’t get ripped off — and it’s resulted in $2-3k of savings this year alone (disputing the purchase of flawed merchandise, holding credit card companies accountable for their advertised rewards, disputing false information on our insurance reports, …). I’ll lump that category into “extra fees” that we avoid by me having the time (and energy) to fight for the money.

To even consider taking full time work, I would need the salary to trump my current annual wages by $23k! Of course, there are some very real benefits of full-time work — employer match to retirement savings and health insurance, to name a few.

What do you think of these expenses — did I leave something out, or do you think this is ridiculous?

I’m earning $X now (where $X could swing +/- 10% in any given year), and I would really only consider working full time for $2X, which would more than cover the extra expenses. But is it worth it?

The Modern Way to Float

Decades ago, it was common to float a check. For my reader(s?) born after 1990, here are two examples:

• I go to the grocery store and write a check for $200, even though I know I only have $150 in my bank account. I expect to receive my paycheck tomorrow, so I can count on the paycheck being deposited before the grocery store cashes my check (it used to take several days to a week).
• Watch the Leonardo DiCaprio movie, Catch Me If You Can.

With the rise of debit cards and check scanning technology, the time between writing a check and the funds being withdrawn has shrunk from a span of days and weeks to a span of seconds and minutes.

The modern way to float a check is to use a credit card.

Credit card users fall into two buckets:

• “floaters” who use the card for its various perks (rewards, convenience, consumer protection, etc.) and pay the balance in full each month
• - “debtors” who don’t have the money to pay the balance in full each month

When talking with “debtors,” I have sometimes had trouble explaining how I use my credit card, but now I found a good way to explain it: I use my card the same way people used to float checks. For each transaction, I used to have a grace period of 2-6 weeks to pay for the transaction. With recent legislation (sec. 163), the grace period is now 3-7 weeks!

Ask for a no

A friend told me about the idea of “asking for a no,” which means asking for something you do not think you will get when you have nothing to lose. It is great practice for negotiating when the stakes actually matter.

Some people do not like negotiating because it seems manipulating or mean – but it doesn’t have to be either of those. At its best, two people negotiate to find a mutually beneficial solution. It is possible (and usually advisable) to be polite, respectful, and honest throughout a negotiation.

Recently, I “asked for a no” at The Gap. A jacket I had been eying finally came down in price from $78 to $30. I particularly liked the green jacket but noticed that the yellow and blue jackets were marked down to $25.

• I took the green and yellow jackets to the cashier to confirm I would only pay $25 for the green jacket. She said “no,” they have different prices.
• I asked if she could match the lower price, and she said “no.”
• I asked if there was any other discount she could give. She paused and then sold me the green jacket for $25.

The $5 at stake is not a huge amount, and I would have bought the jacket for $30.  By asking for a lower price, I practiced staying calm in a low-stakes negotiation.

Have you “asked for a no” before? I encourage you to “ask for a no” this week and write about your experience in the comments, or email me privately.

Dollars, Cokes, and Carabiners

A friend says that as a child he thought of everything in terms of how many cokes it would cost. Instead of thinking about how much money he would earn per hour, he would think about how many cokes he could buy per hour of work. (His mom was anti-sugar.)

Another friend compares all purchases to what he could buy in rock climbing equipment. “Another beer at the bar? Nah, because I could buy a new carabiner with that money.” (I know very little about rock climbing … he probably is not buying new carabiners, but that is the only name of rock climbing equipment that I know).

I wonder how common this behavior is. I would love to get results of a survey with these questions:

• What % of the population thinks about money in this way (or has in the past)
• Of people who think about money in explicit, concrete terms, what is their current credit card debt
• What was their maximum credit card debt in the past?
• What other types of debt do they have?

My hunch is that these people have below average credit card debt.

Another way to dispute a purchase – small claims court

Yesterday, I wrote about disputing a purchase through a credit card company. When I old the story to a lawyer friend, she suggested that I could also use small claims court to resolve the dispute.

Here is an interesting article about taking an airline to small claims court over a “weather-related” flight delay.

To me, the effort to take someone to small claims court seems significant. I much prefer going through the credit card company, since all I had to do was fill out some paperwork.

The guy says it only took 4 hours of his time total to handle the claim, but I know it would take me longer. I would spend at least 4 hours reading about small claims court, another 2-3 hours consulting two friends who are lawyers (I would take them out for coffee to ask for the advice), 2-5 hours worrying about it the day before going to court, 1-2 hours going to the courthouse and coming back, and then 1-2 hours thinking about it afterward (that adds up to at least 10 hours).

Getting a lower car price, after the purchase

I have been pretty happy with my new car, but I am even more happy now that I got $600 back after paying for it!

When filing away my papers, I remembered that the invoice had a charge of $595 for an “appearance package,” which I was told included wheel locks, mud flaps, floor mats, and a custom paint job.  The next time I went to my car, I noticed no mud flaps, no floor mats, and no custom paint job. In the flurry of paperwork and driving away my new car, I had not noticed they did not deliver the “appearance package” (except for the wheel locks, which were included).

I called the dealership, and my calls were not answered and not returned. Eventually I talked to a manager who said they would not refund my money because (literally, he really said this):

“We already gave you such a good deal. Other people pay twice what you paid.”

I said, “Don’t give me that crap.”
[Note: I really said the word "crap" and not another word that could have gone in its place and could be considered offensive.]

He said, “You are using offensive language and need to watch what you say.”

I said, “I am sorry if I offended you by saying the word ‘crap,’ but you are not being honest with me.”

At that point, we got off the phone, and I immediately called my credit card company and requested to dispute a transaction. I was transferred to a very friendly and helpful lady who said that I had a strong case of “misrepresentation.”

Within three days of me submitting the credit card dispute forms (by fax), the disputed amount was credited to my account.

The situation is not settled. If the car dealership can “prove” that the product/service was provided, then I am responsible for the disputed amount. If that happens, I will have to decide how to proceed. I do not see, though, how they can fight this dispute without lying.

Free money at the mall

I was shopping at Tyson’s Corner (a giant mall in Northerv Virginia) and went into a store I had never visited before, Martin + Osa.

A lady approached me and asked if I would complete a survey about Martin + Osa clothing. The survey would take an hour, and I would have to try on 10 pieces of clothing. For my time, I would receive a $75 AmEx gift card (these gift cards work like a debit card).

I decided to complete the survey because

• I had nothing in particular to do in the next hour on a Sunday afternoon.
• $75 is more than my current hourly wage*.
• This would be an opportunity for me to try on a lot of clothes in the store and decide if  I like the store.

My conclusion: I liked a few of the sweaters but not at the prices they were selling for.

I spend the $75 the very next day on a lamp for my “library” (I rearranged my apartment so that what used to be my dining room is now a small library). The original lighting was harsh and not so pleasant for reading.

* A quick way to compute your hourly wage is to take your annual wage, drop the last three digits and divide by 2 (really, this is dividing by 2,000, which is 50 weeks times 40 hours/week)

Reader Question: Income and Housing

A reader asked about a rule of thumb for how much to spend on housing.

From the Department of Housing and Urban Development:

The generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing. Families who pay more than 30 percent of their income for housing are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care.

For someone renting, it is certainly possible to rent a home and pay more than 30% of annual income (before taxes). When applying for a loan to buy a home, though, the applicants’ income may be considered as a factor when determining the size of loan allowed.

At one point in grad school, I was spending 45% of my income on rent (which was more than half of my monthly take home pay!). Though I would not recommend anyone spend so much of their income on housing, I decided to do it because I knew the situation was temporary and I had savings to cover other expenses.

A 2 day gap

Between when my student insurance expired and my employer’s insurance started, there was a two day gap.

Being what I consider to be responsible, I bought 30 day short-term coverage with the intention of canceling it after a few days. I tried canceling it, but between my work schedule and the hours the office was open, I could not get through to a person, and the automated computer system would not me cancel the policy. When I finally did reach a person (after two weeks), I could not cancel my policy.

Of course, I had to go to the doctor in September, and I paid about $200 out of pocket for a 5-minute doctor visit and 7 days of antibiotics (I got a cut, which got infected … it was gross and painful!). If I had not gotten the short-term coverage, I would have been reimbursed for these expenses. But, since I have the short-term policy, I cannot be reimbursed by my new policy.

In the end, having emergency coverage for September cost me $230 more than it would have cost to go two days without coverage and then join my employer’s plan.

Doing it over again, I would still get the short-term coverage. But, I would read the policy more carefully in order to understand the cancellation policy. I still might have the problem with reaching a human at the insurance company to cancel the policy.

Today is my last day of coverage on the short-term plan and tomorrow I get corporate benefits! Yay!

Flexible Spending Accounts

With my new job comes my first non-student health plan (yay!) and my first opportunity to open a Flexible Spending Account (FSA). Pre-tax money can be put into an FSA, and the money can be spent over the course of a year to pay for medical expenses, dental expenses, and some OTC items (i.e., Clearasil).

The funny thing about FSAs, though, is that whatever money is not spent is forfeited. At our benefits information session, I asked where the money goes … because really, isn’t it odd that the money just disappears? Whenever something is “forfeited,” it has to be forfeited to someone. The companies overseeing the accounts keep all the leftovers, which was estimated at a total of $210 million in 2004.

Because the money is pre-tax, consumers may still come out ahead. On average, 3% of deposits are forfeited. So, instead of paying 10%+ in taxes, people are paying about 3% for the FSA.

I ran through the numbers and calculated that I could potentially save $60 by using the FSA. But, I would have to file a lot of forms (5-10 annually) and would have to wait several months to be reimbursed. Some FSA plans give debit cards so that the expenses can be paid for directly (without the reimbursement step). I would be more inclined to use the FSA if it came with a debit card.

Do you use an FSA? What has been your experience?