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Spend Money to Save Money: Smart Power Meters

by Smithee on November 3, 2009

in Frugality

We all have power meters attached to the buildings in which we live, and the little needle keeps spinning around and around, ad nauseum, at least until solar panels become affordable. I recently read a story of a family who managed to install solar panels, and while that would normally have cost over $20,000, with various national and state rebate programs, they only spent $8,000.

Wow. Imagine having $8,000 to spend.

We’re customers of Green Mountain Energy here in Dallas, so our bill payments go toward producing more renewable energy (see the big bathtub analogy for more on how this works). But the hardware is operated by a company called Oncor, which has decided it’s time to upgrade our power meters to be smarter. Oncor worked through some calculations (Surcharge Analysis PDF) and figured that the best way to install them would be to charge the average customer $2.12. Every month. For eleven years.

That’s $291.72 for a new power meter.

Within the last month, a hundred grants were given out to companies making improvements to power meters. The company in our area was not one of them. So residents of DFW are likely stuck with the fee.

On their FAQ about the Advanced Meters, Oncor made this suggestion for dealing with the extra $2.12 per month:

How can you offset this fee? Just replace a 100W light bulb with an Energy Star CFL light bulb and you could save more than $2.30 a month.

That’s cute, and likely true, but I don’t believe we’re still using any of the old style bulbs at our house.

This entire scenario of being charged over an eleven-year period for something that won’t be available to everyone until 2012 would be supremely depressing, were it not for the fact that I’m a big data nerd. I love efficiency, and you can’t improve efficiency unless you know exactly what is being wasted. A smart meter will do that for me.

Google PowerMeterBut what’s depressing again is that I could have this right now, for only $200. The Energy Detective (TED) Series 5000 is a device that attaches to the power control panel on the inside of your house, rather than the outside. Other than that, it does all the same stuff: analyze your power usage in real-time, and over regular intervals, then adjust your behavior accordingly.

I’d be excited to get a TED set up in my house, then walk around unplugging one thing at a time, finding the major offenders, maybe put some devices on a schedule; or find out exactly how much we’d save by keeping the house, say, 2 degrees warmer. Those are just a couple of examples. For all I know, more energy is being wasted when two particular devices are running together for one hour than by running both separately for one hour each. Like I said, I’m a big data nerd.

I’d be very interested to hear your story of using a smart meter. Has anybody had the pleasure, yet?

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ING Direct Offers “Added Value” Certificate of Deposit

by Flexo on October 19, 2009

in Saving

In an effort to attract more new deposits, ING Direct is offering a new savings product with a high interest rate, the “Added Value” certificate of deposit (CD). If you are willing to deposit new money to ING Direct and let the bank hold that money for one year without any withdrawals, ING Direct will pay you a rate of 2.25% APY (as of October 18, 2009). This is the highest rate ING Direct is currently offering; the rate on the “non-Added Value” CD is 2.10% APY.

The interest rate offered on the “Added Value” CD is currently the best rate in the country for 12-month CDs among major national and regional banks. Is this a sign that ING Direct is returning to its roots as the bank that tops the charts for customers who are interested in having their money earn as much as possible while in mostly liquid accounts? I don’t think that’s going to happen; the interest rate on the bank’s flagship Orange Savings Account is currently 1.30%, ranking ING in the middle of the banks who claim to offer “high-yield” savings.

Customers tend to glow about ING Direct’s customer service, which shows that the bottom line is not always the primary, or at least not the only, concern for consumers.

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How to Create Your Own Extended Warranty

by Flexo on October 15, 2009

in Consumer

In my article the other day about the deal I got on a new computer despite my immediate need, I neglected to mention something important: I refused the extended warranty that the salesperson offered numerous times. Any extended warranty is almost always a bad deal.

When I was a teenager, I had a short-lived job at a ubiquitous electronics store; let’s call it “Transistor Hut.” This was the only job in retail I ever had, and I can’t say I was a fan. Our bonuses were determined by our success in selling the “TSP,” an extended warranty. Let’s say that stands for the “Candy Service Plan (with a T),” and I don’t know whether this is still in existence.

The price of the TSP depended on the price of the item, and TSPs were available for almost every product. If you buy a $19.99 pair of headphones, you could spend another $9.99 for unlimited replacement, no questions asked (other than your phone number). If you buy a $299.99 DVD player, $79.99 (or so, keep in mind this was fifteen years ago) would allow you to bring the broken device into the store, have them ship it to a repair facility, and fix or replace it. That’s a process that would likely take several weeks.

The TSPs and any other store’s extended warranties are pushed hard by salespeople because they are often rewarded for them, and they are rewarded because they are very profitable for the store. Most people who buy the warranty will not use it, so the funds become significant income for the company.

Most credit card companies automatically double the manufacturer’s warranty on products purchased with the card for up to one additional year, so that automatic, free protection is often more than enough. Check your credit card’s terms to see if this is available to you. I knew it was available to me on my American Express Blue Cash for Business Card when I purchased the new desktop computer for Consumerism Commentary’s multimedia production.

Perhaps a smarter way to deal with the possibility of broken items — besides not buying anything — is to self-insure. Rather than spending an extra $50, $300, or $2,000 for an extended warranty depending on the product, put that amount into a new savings account designated for your own personal warranty extension. Do the same for all the products you buy for which a salesperson attempts to sell you the extended warranty. What you have created is a pooled funding source for repairs. It is unlikely that all of your products will break or stop functioning, so you can withdraw from this fund to pay for repairs for the one item that fails.

With this strategy, you keep all your money if nothing goes wrong, and if the money is sitting in a high-yield savings account, it’s working for you rather than lining the pockets of major retail chains.

Here is the step-by-step process.

Step 1. When you purchase an item, make note of the cost of the extended warranty. Don’t buy it.

Step 2. Transfer this amount to a special savings account that you will not touch until one of your “protected” items needs to be repaired. ING Direct lets you create sub-accounts, one of which you can name “My Extended Warranties” or “Warranty Fund.” Don’t create a sub-account for each item. One for all of your items will do. Thus, the “Warranty Fund” is pooled.

Step 3. Repeat steps 1 and 2 using the same Warranty Fund you already created for all products you buy that might break or are associated with an extended warranty. This will build up a sizable Warranty Fund in your own name at your own bank earning interest for you.

Step 4. When one of your self-insured products breaks or otherwise needs repairs, dip into your Warranty Fund. Try to avoid using your Emergency Fund unless the Warranty Fund doesn’t cover the full expense and the product must be fixed or replaced.

The strength here is that you are pooling your own funds. This is what the retailers do to ensure warranties bring significant profits to the company. Just like not every customer will take advantage of their purchased extended warranty, not every product you self-insure will break unless you are extremely unlucky or extremely careless. In addition, the best benefit of self-insuring is that you will never have to argue with a store representative about whether certain type of damage is “covered.”

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Ten Things to Do With $1,000 Right Now

by Flexo on October 14, 2009

in Saving

Mention to your friend that you suddenly received an unexpected $1,000 and I would be willing to bet he could come up with several suggestions for you. Most of those suggestions will likely involve handing the money over to him. My first suggestion is to refrain from telling your friend when you have $1,000 more than you know what to do with. Once that is achieved, it is best to have some ideas in mind just in case this situation presents itself.

Money Magazine has eleven suggestions for people who find they have $1,000 sitting around without a planned destiny.

  • Top off your emergency fund. If you don’t have an emergency fund, $1,000 is a great starting point. It is quite easy to open a high-yield online savings account so you can keep your emergency fund close while letting it earn as much as possible.
  • Spend five hours with a financial planner. Here Money Magazine assumes you will go to a financial planner who charges $200 per hour. Unless your finances are unusually complicated, skip this suggestion.
  • Buy a top-notch stock fund. Here Money Magazine suggest putting your money in actively managed mutual funds. I suggest sticking with low-cost non-managed index mutual funds. Vanguard requires $3,000 to start investing, but the low-cost Schwab Total Stock Market Index Fund (SWTSX) requires only a $100 minimum deposit.
  • Upgrade your home appliances. I can see this being a legitimate option if you have problems with your appliances or need to switch to more energy-efficient models.
  • Help on a large scale You can use the $1,000 for others’ good. Money Magazine suggestions buying sheep for farmers, offering small business loans through Kiva, and planting trees. Any charitable option is a good choice for an unexpected $1,000.
  • Join a gym. If you know you can make your gym membership last, this could be a suggestion that saves money through your improved health. Otherwise, a gym membership could do nothing more than suck your money away.
  • Beef up your IRA (if you’re 50 or older). Anyone age 50 or older with the appropriate level of income can invest an additional $1,000 above the standard maximum in a Traditional or Roth IRA.
  • Pay down credit card debt. This should probably be towards the top of the list. Paying off expensive credit card debt saves you money in interest fees down the road. $1,000 can go a long way to getting out of debt.
  • Update your estate documents. Money Magazine assumes you had your estate documents in order at one point. $1,000 should cover updates to your will, health-care proxy, and power of attorney.
  • Start a young investor off right. Money Magazine suggests setting up a diversified portfolio for a child using a combination of Schwab’s low-minimum and low-cost index funds.
  • Become a star at work. This is the most unlikely suggestion for spending your own $1,000. Money Magazine suggests taking a class, much like the improv class Smithee is taking, or any other course that might provide you with a competitive edge. Self-development is a good idea for your own money, but I wouldn’t spend $1,000 on an activity that does nothing more than increase my value to a corporation.

What would you do with an unexpected $1,000 right now?

What to do with $1,000 now, Money Magazine, October 12, 2009

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Is It Possible to Save Too Much Money?

by Flexo on October 2, 2009

in Saving

For most humans, life is much shorter than we would like, and for many of us saving even ten percent of our income will never result in a state of wealth within our lifetime. There are too many forces working against this endeavor: a lack of sufficient opportunity, inflation, and unplanned events to name a few. In addition, most people, at least in the United States, save much less than ten percent. It’s no wonder spending other people’s money and going into debt is so alluring for many.

Even if wealth eventually arises through conscious, compounded saving, by the time we reach a level of net worth that qualifies us to fall into the category we have set as a goal for ourselves, we are too old to enjoy what we have set aside. Putting aside the noble, selfless acts of passing our assets to charitable causes and descendants, the point of accumulating money is not to have a large bank account; the purpose of saving is to do something with the money.

When we save, we are putting aside our desire to do something now for the chance of doing something more later. Those nurturing a superfrugal mindset argue you should always choose the latter. The problem with the future is it never arrives regardless of how long you wait. Even though there is always a place or time or dollar amount where you can draw the line and begin living your life, that line may never come.

I will freely admit that I am not particularly adept at focusing singularly on the future. I likely fall somewhere along the spectrum of forward-thinkers. While I am not overly concerned about the present and I do not need immediate satisfaction, I do have my doubts about the future. I am saving money for retirement, including putting money into accounts that can’t be touched without penalty until several decades pass, but there is a possibility I may not live long enough to reach that goal. I am sacrificing a part of my life — not only the selfish activities in which I’d like to participate but the good, charitable things I could be doing with that money now — for the chance of doing more later.

If I don’t have the opportunity to do more later later, I would have made many needless sacrifices.

There are no certainties, so how can anyone truly offer advice about how much someone should save for the future? Life is short, and it’s important to make the most of it while you have a chance. No one knows what tomorrow will bring, so we guess and we offer suggestions. Save ten percent of your income (a weak but popular rule of thumb), or save as much as possible, but don’t completely sacrifice your life now for your future.

With your finances in control or on the path to being in control, ensure you are making the most of the short time you have on this planet. The slow road to accumulating money is the road that most people will take, so enjoy the scenery. The future may never come, so don’t deny yourself all joys of experiencing life now, however you define these joys, in deference. If your approach is causing you to miss out on aspects of life that you find important and will later regret, you may be saving too much money.

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Ten Things I Will Teach My Children About Money

by Flexo on September 28, 2009

in Personal Finance

I do not currently have children, but I have not ruled out starting a family some day. If and when I do have children, I hope I will be able to help them become smart and capable adults over time. I believe this is what my parents have done for me, and I’d like to believe I’m in a position to pass on good attitudes about money.

Here are a few concepts I’d like to teach these future children about money as they become old enough to understand them.

I intend to teach as much by example as by conversation with the understanding that no person is perfect.

1. Money is neither good nor evil. Money is simply a tool, with no quality that defines it as good or evil. It can, however, be used to do good things or evil things. Money does help reveal the nature of a person. There is nothing inherently bad about not having little wealth or having great wealth. The value of a person is not defined by how much money he or she has, so you cannot judge a person by looking at the bank account statements.

2. Money is not a goal. There is no point in wanting to have one million dollars, or any sum of wealth that might make a good milestone, if it servers no purpose other than to sit in a bank account or at the bottom of a balance sheet. Focus on real goals, not net worth. Don’t be the boy who, when asked what he wants to be when he grows up, answers, “Rich.” It’s not the number that counts, it’s what you do with it.

3. Money will not make you happy. Money is not correlated to happiness. Rich people aren’t necessarily happier than poor people. In fact, wealthy people are more stressed. The happiest people are those who are satisfied with what they have; if you always want more, you will always be struggling. Now, there will be people who will tell you that you must constantly strive for more in order to be successful, but these are people who equate success with things like job title, wealth, and seeing their name on seminar advertisement posters. They’re probably not happy. It’s okay not to settle, but only if your goals are worthwhile.

4. Don’t be jealous of other people’s money. There will always be people who have more money than you, but there will always be many more people who have less. If you learn to handle your money properly, you will find that you’re more financially secure than others who try hard to flaunt their wealth; those with fancy cars and houses may owe money to other people and to banks. Jealousy is a distracting emotion, so it’s better for your own sanity to worry about yourself than it is to look at other people, especially when you can only see what they are showing on the surface.

5. If you are in a position to help, you have an obligation to help. As I mentioned above, at any one time it is more likely you’ll be in a better financial position than most of the other people who live on this planet. You are lucky to be born in a rich country in a very prosperous time. Though it is no fault of your own, these circumstances present the responsibility of helping to make this world a better place in whatever way you see fit.

6. Companies want your money. Corporations spend lots of their own money trying to develop ways to get you to give your money to them. Don’t believe what you see in commercials, on television shows, in movies, on the internet, or even on the news. Everyone has an angle and that angle is often to try to get you to part with your money. It’s a cynical view of media and of the world, but turn off the commercials and think for yourself. Increase the signal-to-noise ratio.

7. Pay attention to your money. Once you start receiving an allowance, create a budget. Save part of the money and spend the rest as you see fit, but write out a budget and track everything you buy. This is a good habit to start early. If you’re paying attention, you’ll soon realize that the only situation that results in building your wealth is spending less than you have.

8. Don’t expect a free lunch. I will do everything in my power to ensure that lots of opportunities are available to you, but our culture within the “middle class” is defined by trading your time and effort for money. In other words, you get paid for working and you get paid better for working harder. You’re not a Bush, so you won’t get to be President of the United States because it runs in our family. There is no trust fund.

9. Save as much as you can for later. Even though Albert Einstein never really said that compound interest is the strongest force in the universe, he probably would suggest saving as much money as possible. It is true that the sooner you can control your actions to delay gratification, the better you can plan for the future. But it is also true that spending money shouldn’t always illicit a feeling of gratification. Feel good about saving, then you can feel gratified when you put money in the bank, not when you take it out.

10. Avoid borrowing money. Just like money is inherently neither good nor evil, owing money to other people is inherently neither good nor evil. Borrowing money has its drawbacks. Any purchase you finance with interest will end up costing more than it should. However, within the “middle class,” it will be difficult to avoid some borrowing. Not all debt has to be bad. You may need a loan for college and you almost definitely will need a mortgage to buy a house. Make smart choices about these purchases and you’ll be in a good position even if you do have debt.

11 (bonus). It’s not about the money. While money gives you flexibility and eventually independence, don’t spend too much of your time focusing on it. Realize that money should not be the sole driver for your decisions. Many smart people will tell you about “return on investment” (ROI), but sometimes you can’t measure the validity of a decision by how much money you receive. Think about all factors when making decisions. Some decisions, like those pertaining to investments, should be based on financial considerations as much as possible. But for other decisions pertaining to your life, money should be only one consideration of many.

Do you disagree with any of the above lessons? What do or will you teach your children about money? Is there anything else you wish your parents had taught you?

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Earn $500 By Referring Friends and Readers to ING Direct

by Flexo on August 18, 2009

in Banking

Update: The waiting list is currently full. Keep reading Consumerism Commentary (or subscribe) to be notified when the waiting list is open again.

ING Direct is one of my favorite banks due to their savings account. While ING Direct’s Online Savings Account does not offer the highest interest rate, they are consistently towards the top offering much more to savers than a typical brick and mortar savings bank, have a fantastic website, and offer a smooth experience when dealing with customer service.

While I have started exploring other high-yield savings accounts like FNBO Direct (review), Ally Bank (review), and EverBank (review) I still use ING Direct for the bulk of my cash management.

Here are some of the ways I currently use ING Direct:

  • Every two weeks, my pay check is automatically deposited in my ING Direct checking account (known to the locals as “Electric Orange”).
  • Each month, several services deposit money directly into a couple savings accounts at ING Direct.
  • My money at ING Direct is split into twelve sub-accounts, ten personal and two business, with names like “Orange Vacation Fund” and “Orange Emergency Fund.”
  • I have two PayPal accounts, and one sub-account at ING Direct corresponds to each. This way I can maintain very small balances in the linked accounts to prevent problems with PayPal. When I withdraw money from PayPal into ING Direct, I can move the money to a different sub-account immediately.
  • ING Direct works with Quicken’s Direct Connect feature, which means I can download my bank transactions from the software and reconcile the account automatically.
  • My credit cards are configured to automatically deduct the full amount of my bill from my ING Direct checking account on the date the payments are due.

Although ING Direct’s interest is not competitive with the newest online banks, you can match or exceed the income generated by this savings account by using the bank’s referral feature. For each friend you introduce to the bank, ING Direct will thank you with $10 for you and $25 for your friend in the form of an interest bonus. You have 50 opportunities to earn the $10 bonus for a total of $500.

Unless you’re extremely well-connected, it is unlikely you have 50 friends who are interested in opening an account in ING Direct (though they should be). So for the last year or so I’ve been helping Consumerism Commentary readers by connecting them with potential new ING Direct customers. Through this announcement last year, I’ve already helped over 300 readers earn some extra money towards their $500 limit.

I am running out of names of readers waiting for their turn to earn a bonus so I am re-opening the waiting list. If you are interested in earning bonus interest from ING Direct, comment here (comments on this post are now open) or on any earlier article about ING Direct and mention you’d like to be added to the waiting list. I will cut off the waiting list at about 100.

Update: The waiting list is full again as of 11:15 PM ET on August 18, 2009, eleven and a quarter hours after this notice was posted. Thank you, everyone. I’ll post a new message in a few months when the waiting list is open again.

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Iced Coffee Savings

by Smithee on August 18, 2009

in Frugality

This is a cliché, but I need my coffee in the mornings. I prefer it iced, except in the very brief winters we have here in Texas, and for a long time, I was a loyal customer of the Starbucks Iced Coffee in a Can.

R.I.P. Iced Coffee

I’d have one every morning at least four times a week, at a cost of about $2.00 each. They cost more in the convenience stores, but at my former employer they’d have them stocked in the cafeteria downstairs. It was the perfect amount of caffeine, deliciously flavored, to help me self-medicate my A.D.D. And in terms of the Expensive Coffee-Related Drink factor, two dollars is on the low end of the scale.

And then Starbucks stopped selling them. Like Pudding Pops and the Bar None candy bar, my favorite treat was yanked out of my grasp with no alternative presented. Since then, I’ve gone back and forth to iced tea, water, some truly awful “energy+coffee” replacement that Starbucks is now doing, the bottled Frapuccino, and my more normal “iced venti vanilla latté, please.”

None of them have really satisfied in the same way. I just want roughly 8-10 oz. of iced coffee, and I want it to be easy. Well, I found a way (thanks to my wife) to make it easy, and cheap, through this cold-brewed iced coffee recipe at the New York Times.

The recipe makes a measly two drinks, so I just tripled the recipe to make a full week’s worth (give or take a day for the vanilla latté, which is something I like to do for myself on Fridays, anyway). I tried it out for the first time this morning, and it was an instant success. All I had to do was put some ice in a glass, pour in the coffee and go.

There are about three cups’ (the measuring kind) of ground coffee in a one pound bag, which is enough to make the modified recipe three times. That’s eighteen mornings’ worth of iced coffee for $10, presuming you’re buying the expensive ground coffee at Starbucks. Which I will probably continue to do. Nobody’s perfect.

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