Money To Live

January 28, 2009

More on holiday giving

Filed under: Uncategorized — by moneytolive @ 5:00 am

Last month, I wrote about my plan for the holidays:

To celebrate the holidays (and also being gainfully employed), I made a contribution to every organization that asked me to. I enjoyed picking out a pink box of Legos (because girls need Legos, too) for Toys for Tots and some sweaters for a young adult in an alternative high school.

And I got this response from Ellen C:

I really enjoy your blog but I keep thinking about the phrase that you made a contribution to every organization that asked you to. I was really surprised when I read it because you seem really focused and intentional about your financial decisions and that didn’t seem to fit. Maybe I just have never thought about giving money to every organization that asks! I read this blog post last night and thought it was really interesting and that you might like it too.
His considerations for who to give to match up with some of mine.

Since I am not a famous billionaire, people are not pounding on my door asking for donations. If that were the case, my donation strategy (give to anyone who asks) would not have worked. As it is, there were two groups that requested donations from me: (1) organizations I was involved with in the past and (2) organizations that a friend or colleague is involved with. By giving to organizations that I am already involved with or which I have a personal connection to, the donation is more tangible – I know what kind of an impact it will have, and I trust the donation will be used in a meaningful way.

Now I will get at Ellen’s point more directly, that I seem “really focused and intentional about” financial decisions. There is a topic that I have been wanting to write about here, but I could not decide how to bring it up.

(very) Roughly speaking, there are two types of people in the world: maximizers and satisficers. In economics lingo, a rational person wants to maximize his utility. Utility means something like “happiness” but is hard to define in a real world setting. Economists and philosophers will continue to talk about utility until the world ends.

Back to these to types of people – the maximizers and satisficers. When a maximizer buys a car, he finds the absolute best car for his situation. “Best,” of course is relative, but it is probably some combination of cost, gas mileage, number of doors/seats, horsepower, sound system, cup holder placement, seat options, convertible options, etc. The satisficer picks a few car options that are important and then buys the first car that satisfies those few options. For example: under $15K, four doors, gas mileage above 30 mph, blue paint job.

Very loosely speaking, satisficers are happier than maximizers because the maximizer always knows what wasn’t optimized.

Though in some ways I can be an optimizer, in a lot of ways I am a satisficer. Especially compared to many of my former classmates, I am a satisficer.

A few days ago I had coffee with some friends, and I brought up Ellen’s comment because I thought these friends could help me think through the issues. One friend admitted that she had a horrible time trying to decide how to donate her money. In December she stayed up until 3 am for five days in a row agonizing over where to donate the money. In the end, she gave up trying to figure it out and gave the money to the World Bank. This is how she described her thought process:

One of the best ways to ensure children receive proper nutrition is to feed mothers. So, let’s say I donate my money to an organization that feeds mothers in an efficient way. But what if the local crops are abundant that year – then they didn’t need my donation. And if the crops are abundant, then there was a lot of rainfall, which may have resulted in a cholera epidemic. In that case, it would have been better to donate my money to a medical relief organization.

My poor friend – she was obviously stressed out. She is a perfect example of a maximizer (and she would not be offended by my classification, she is a self-proclaimed maximizer).

When it comes to charitable giving, I am a satisficer, not a maximizer. I like to give to organizations that have a record of fiscal responsibility. I like it when I understand the impact my donation will have – I can imagine a child playing with a toy, a teenager without a family opening a gift on Christmas morning, an immigrant taking English classes. The issues that I care about the most are education and health, so most of my giving and volunteer work are somehow related to those issues.

I am impressed with what Tyrone Boucher has to say about his giving plan. He has put a lot of thought into it, and I love what he says at the end of his description of his plan:

The process of trying to figure all this out has taught me that there are so many ways to give money, and most of them are both useful and challenging in their own ways. I try not to get too caught up in working towards perfection, because there is definitely no perfect or best way to create a giving plan. I think of giving money as one small facet of my social justice work that hopefully reflects my broader commitment to wealth redistribution, anti-oppression, and grassroots organizing.


January 21, 2009

Disputing a credit card charge

Filed under: Uncategorized — by moneytolive @ 5:00 am

Back in October, I wrote about my dispute over an “appearance package” that was included in the cost of my new car, and I want to let you know how that ended.

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).

After two and a half months, the dispute has been settled. It took four rounds of paperwork:

  1. I sent forms to the credit card company
  2. The dealership sent forms to the credit card company
  3. I sent new forms to the credit card company
  4. The credit card company sent “pre-arbitatration” forms to the dealership.

When the dealership received the pre-arbitration forms, they were finally ready to settle with me, and they agreed to refund about $520; I agreed to pay parts and installation for the wheel locks.

Now that the situation is resolved, here are my thoughts:

When you have the money to cover the bill, pay for large purchases with a credit card. Had I paid by check or debit card, the dealership would have had no reason to talk to me, and my only means of recourse would have been to go to small claims court.

Documentation is crucial. I kept track of who I talked to and what was said. At every step of the way, the dealership changed some version of the story and lied to me or the credit card company. I just kept responding with my version of events and pointed out that the dealership was not being truthful.

The credit card company did not take my side in the dispute. All they did was convince the dealership to communicate with me.

Filing and settling a dispute takes a long time. I thought it would take a few weeks to settle everything, not a few months. During that time, I did not have to pay the disputed amount. The credit card company put this amount “on hold.” When the dispute was settled, the dealership refunded about $520 to my credit card, and the credit card company rebilled the original charge to my account.

Next time, I will stay calmer and spend less emotional energy during the process. All I had to do was keep submitting forms and documenting what happened. A merchant does not want to go to arbitration, which is the ultimate result of such a dispute. When the merchant sees you are not going to give up, they are more likely to settle.

January 14, 2009

Review: The Jungle

Filed under: Uncategorized — by moneytolive @ 5:00 am

The Jungle by Upton Sinclair

For a long time, I hesitated reading The Jungle because I had heard that its description of the meat packing industry is graphic. I finally got up the courage to read it, and the book is indeed graphic and very sad. What surprised me the most was Sinclair’s detail to personal finances.

Jurgis and his bride-to-be and her family head to Chicago from rural Lithuania for a better life. They hear about how high the wages are and imagine living richly – but they don’t know that expenses are also higher.

They make it to Chicago and buy a house but do not understand mortgages. They are told the monthly payment is $12, but really there is a monthly principal payment of $12 and a monthly interest payment of $7. They spend their entire savings on a down payment and keep up with the monthly payments for several years but eventually fall behind after a few incidents and are evicted.

Change $12 to $1,500 and $7 to $3,000 and you’ve got a story of the modern-day mortgage crisis.

While I think that the current financial crisis is quite different from the corruption of Chicago in the early 20th century, it makes me wonder – will there be books like this about the mortgage crisis?

January 7, 2009

Who needs cash in a foreign country?

Filed under: Uncategorized — by moneytolive @ 5:00 am

On a recent six-day vacation abroad, I used absolutely no foreign cash. Not only did I not have any foreign currency, but none of the four friends I traveled with did either.

A few weeks before the trip, we emailed back and forth about all the details – who would sign for the rental car, how to find each other at the airport, and how to pay for everything. The general consensus was to use credit cards as much as possible. I knew from previous trips that is is very easy to use ATMs in a pinch, so I recommended that no one exchange money before the trip.

Only half way through the trip, did I realize what a big deal it is to not need currency in a foreign country.

We all returned back home without making any cash transactions. This was possible in large part because we rented a car and did not need to pay for taxis. While it is possible to pay for cabs with a credit card, it tends to be a hassle because only some cabs are equipped with the necessary technology.

The one time I used US currency on the trip: to tip the valet at the hotel

The one time I wished I had some foreign currency on the trip
: To pay a bus fare when it snowed 25 cm (10 in) and we walked more than 1 km to the liquor store because the store by our condo was closed on Sundays

Question for the readers:
Which foreign country uses the USD as its standard currency?

A few years ago I took a trip to this country and used cash but did not have to use a foreign currency because the USD is *essentially* the foreign currency. Technically, the official currency is something else, but the bills of this currency have not been printed for over 60 years.

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