Teaching Kids About Debt

There's a Deseret News article worth reading titled, Teaching Our Kids About Debt Danger. We obviously believe an advanced education can still be a good reason to incur debt, even large debt. That's one of the purposes of The Provident PhD—to help those considering advanced education see that having a family doesn't need to be a barrier to that path.  The Deseret News article has some good thoughts about how to convey the importance of good money management to our children.

Make the Milk Last

I like milk. So does my wife. So do our kids. We drink a lot of milk in our house. Not as much as I would if it came out the tap, but still a lot. So we notice when the price of milk goes up, as it has in the past year or so. We’ve started a practice which may shock and disgust some of you, but it works. We buy powdered milk. Yep. I know it sounds gross, but it’s not bad. To mitigate the strange taste, we mix it with real milk 50/50. If you buy powdered milk in bulk from food storage suppliers, it’s much cheaper than the real stuff. You follow the directions to mix the powder with water, then mix the fake stuff with the real stuff and let it sit in the fridge overnight. This cuts probably 30-40% off our milk expenses.

Getting Paid to Shop

When I think of saving money, I usually think of either decreasing my consumption, using coupons, or shopping deals.  However, the reality is that there is a limit to how much we can reduce our consumption.  We have to spend money sometimes.  Therefore, we've found ways to get paid while we shop.

We have a Discover card and a Costco American Express card.  Both give between 1-3% cash back for purchases.  Discover often runs 5% back deals on certain categories as well.  Once we got the Costco card, we thought that we'd make so much more in rewards because it offers greater than 1% more frequently than Discover.  We've been sorely disappointed.  I checked in last week to see how much we'd earned after about ten months of nearly exclusive American Express purchases only to find that we'd gotten only about $115 dollars back.  Our membership at Costco costs $100 a year, so we've only gained about $15 in actual cash back.  We've had better luck with Discover.  I'd guess that we've gotten about $200 in cash back, without any annual fees.  

As you think about credit cards, it's important to think of them as useful tools.  We never carry a balance: we solely use them for convenience and for the cash back.  You also should pay attention to the fine print to figure out how much you're actually going to get back.  I believe Discover doesn't pay a full 1% back until you've exceeded a certain annual threshold of a few thousand dollars.

Another way to get paid to shop is to use online websites that give you a rebate based on the amount you've purchased.  My favorite is Ebates.com.  You sign in, search for a retailer, then click Ebate's link to that retailer's website.  You computer keeps a "cookie" that reports back what you've purchased, but the retailer's website is otherwise unchanged.  That means that you can also use coupons on the retailer's shop.  Here's an example:

I read Gordon's post about car repair.  I needed to replace my car battery.  

• I searched for coupons at brick-and-mortar car parts stores, and found that Advance Auto Parts had a 15% off coupon for purchases over $100, plus a $50 off coupon for your next purchase of $100 or more. 
• I went to Ebates, found that if I linked to Advance Auto Parts from Ebates site then I would get 6% cash back from Ebates.
• I then linked to Advance Auto Parts, selected my battery, and inserted Advance's coupon code
• I finally paid with my Discover card

If my math is right, that means that I got 22% off the price, plus a $50 off coupon for my next purchase.

Every quarter, Ebates cuts you a check for however much cash back you've earned.  I think you need to have earned at least $20.  They also give a signing bonus, so after your first $20 purchase, you get a $10 gift card.  They have other, unusual deals, too.  For instance, when I got internet access at our new house, by linking through Ebates I got a flat $20 payment.  Not bad!

So if you're going to spend money, get paid for it.  And when I want to rationalize, I feel like if I spend lots and lots of money, I'll be rich with cash back!

Earning Points

Platinum reward plans through your Credit Union or bank can be very beneficial. These type of plans are associated with your credit cards. Some of these plans do have an annual fee and if they do the cost usually isn't very significant (check with your institution to see the cost or if there is even a cost).

The way we use this program is with our everyday expenditures such as groceries, gas, clothes, baby expenses, bills, school expenses, etc. We acquire points (for our institutions program) by getting a point for every dolar we spend. Keep in mind that we don't go into any credit card debt just to simply get points. We keep a close eye on what we are spending and make sure we have the money to pay it off before we spend it. By doing this we slowly but surely acquire points with every purchase we make. It's also convenient because these programs often have special promotions such as double or even triple point periods. These special promotions double or triple with each purchase.

Since we have been on our platinum rewards plan (4 years) we have acquired enough points to get 2 plane tickets to Virginia, a $350 crib, a car seat, and a bike trailer. It's nice to be able to get something back just from our everyday spending.

More on Amazon

Patrick had a great post about Amazon last week, so this is building on his suggestions. I used to only use Amazon for books. Then it occurred to me that other items might be cheaper there as well. We've found great deals on Amazon for numerous items, including computer parts and other electronics, exercise equipment, and DVDs. It has also been great for items that were tough to find in a brick- and-mortar location, like a baby food grinder. One of the more recent finds was a cell phone. The screen on my old phone broke, and my first thought was that I would need to buy a new one from our carrier—an expensive option since I didn't have any kind of phone insurance and was not eligible for a new phone. I decided to check Amazon. It turns out that you can buy an "unlocked." cell phone off Amazon for way cheaper than what you'd pay from a carrier. I got a great phone for $30 (and free shipping). I didn't even need to contact the carrier—just switched the SIM card to the new phone and it works great.

Of course, as with any type of shopping, you have to be careful to not buy things you weren't planning to buy and don't need. But as long as I'm getting an item anyway, it's probably worth checking online to see if it's cheaper. 

This may sound obvious, but another huge benefit to Amazon and other online retailers is the convenience factor. Before having kids, I took for granted how easy it was to shop. It becomes exponentially more difficult with children. If I can price compare from my own home, order something that will arrive at my doorstep in a few days, AND is cheaper than in the store, that's an easy decision.

Our Basic Budgeting Trick

I have a secret: We are a little bit inept with technology sometimes. My friend, Amber, posted about budgeting, and in the comments, Justin suggested Quicken or Mint.com as great tools for helping with budgeting. That is awesome! My parents also use Quicken and highly recommend it. We, however, somehow got terribly confused when we briefly played with using Quicken. Fortunately, when we were dating (before our failed attempt at Quicken), we took a Family Finance class. In the class, the professor actually made a huge recommendation for a simple piece of paper on the fridge for your budget. We are into our sixth year of marriage and still using that simple piece of paper. It may not be as ideal as a sophisticated computer program, but it still helps us be aware of our expenses, and in that way it's a great tool.

This paper says "Family Budget" at the top, followed by the month and year (we print a new one off each month). Then we have sections for each of our expenses. We keep each of our receipts and post these under Groceries (food or non-food); automotive; charitable donations; eating out (dating or family); clothing; miscellaneous; and rent, to name a few. We've changed these sections over the years, and they probably still aren't the best titles, but they mostly work because there is at least a place to post each of our expenses. Beside each title, there is a price limit. These also have to be realistically reviewed occasionally.

Archaic? Yes. Difficult? No. So even for the technologically-overwhelmed or the lazy, there's still a way to keep a budget. Because, as Amber said, it's a useful tool for helping to distinguish between wants and needs.

Finally, a quote (which is at the top of each of our budgets):

"I have discovered that there is no way that you can ever earn more than you can spend. I am convinced that it is not the amount of money an individual earns that brings peace of mind as much as it is having control of his money. Money can be an obedient servant but a harsh taskmaster. Those who structure their standard of living to allow a little surplus control their circumstances. Those who spend a little more than they earn are controlled by their circumstances. They are in bondage." -G. Homer Durham

Good Article from Forbes

There's a good article from Forbes titled Five Financial Mistakes That Ruin Marriage. It's not specific to student families, but certainly very applicable. Nancy Anderson offers some good tips on how to avoid the mistakes she mentions.