Live Richly

What are Best Buy Reward Zone Points Worth?

June 6th, 2011

One article we seem to get a lot interest in was our post on what My Coke Reward Points are worth.  Having recently gone to Best Buy, I figured it would be good to do a similar post on the value of Best Buy Reward Zone points.

The way the program works is straight forward:

  1. Join the program
  2. Earn 1 point per dollar spent at Best Buy
  3. Cash in the points for Best Buy certificates
  4. If you spend over $2500 a year, you get Premier Silver status and earn 1.25 points per dollar

The conversation ratio is presented in the following table:

Reward Zone point value

As you can see in the chart above, Best Buy Reward Zone points are worth about $0.02 a point, which means you are getting “2% cash back”.  This is actually decent, especially when compared to other points that are typical worth 1/2 of that at $0.01 per point.  In addition, when you combine this with a rewards credit card it is possible to get “3 to 5% cash back” when shopping at Best Buy.   While this may sound like a great deal, you should consider you are getting this “cash back” on prices that may not actually be that great of a price.

From my experience, prices at Best Buy tend to be 5 to 15% higher than they are online, even when including shipping.  The same is true when compared to club stores like Sam’s Club and Costco or discount retailers like Video Only.  This is not always the case, Best Buy sale prices usually match or beat some online retailers.  But, when Best Buy’s sale price matches online pricing, and you include the Reward Zone points, you may actually be able to get a good deal.

Pros:

  • Points are worth about $0.02 each (effectively 2% cash back)
  • Silver status lets you earn 1.25 points per dollar (effectively 2.5% cash back)
  • No need to carry the card, just use your phone number
  • Free and easy to sign up
  • The Reward Zone Gamer’s Club provides 500 bonus points per $150 spent (effectively 6%+ cash back)

Cons:

  • Points must be spent at Best Buy
  • You must spend at least $250 to reach the minimum cash back payout
  • Reward certificates are non-transferable
  • Points expire annually (unless you are Premier Silver, or use the Best Buy credit card)
  • Best Buy prices are, ironically, usually not the best buy available
  • Hassle of worrying about points

In conclusion, I believe Best Buy Reward Zone points are a great way to maximize the value you get when shopping at Best Buy.   If you spend more than $250 a year at Best Buy, you would be silly to not spend 30 seconds and sign up.  However, going out of your way to earn Reward Zone points, or earning Reward Zone points at other retails or with a Best Buy credit card is probably a waste of time.  Even though the points are worth $0.02 each, you have to use them at Best Buy and the higher price you pay over other retailers will probably negate the benefit.  However, if you can catch a good sale at Best Buy, negotiate a good price, or take advantage of a price match… it could be worth looking into.

One final thought.  The 6%+ on video games is actually a decent deal.  With this program you earn your base Reward Zone Points as well as get a bonus 500 points for every $150 spent.  The result of this looks something like this:

Of course, buying new video games at full price is hardly frugal living… I prefer to take advantage of pre-order sales (typically 10 to 15% off) or buy the game a few months after release.

 

Below Your Means Basics

June 6th, 2011

This month we will be presenting a series of Below Your Means (BYM) Basics articles to help those of you who are new to living below your means, and serve as a refresher for those of us who have (or strive to) live the BYM way.

When you live below your means, you shed a huge source of pressure and strain in your life.  Spending beyond your means, in other words – going into debt – means you are trading your future to get something now.  You are agreeing that in the future you will be willing and able to have a certain amount of money.  But none of us can predict the future.  There are lots of ways people get into trouble with debt.  Accidents and health problems lead to massive medical bills and lost wages.  Your ability to earn can be impacted by layoffs, swings in the economy, your own health, and the health of your loved ones.  Those common tragedies are only one reason to worry about spending more than you have.  In fact, bankruptcy laws are in place to protect people specifically from those kinds of ‘unexpected’ crises.

Money CastleThere is a much more insidious price to pay for living beyond your means.  Doing so assumes that you know now what you will want and need in the future.  In reality, most of us aren’t entirely sure what we want and need today, much less the kinds of opportunities and challenges we’ll face tomorrow.  When you take on debt and fail to save, you narrow the possibilities of what the future could hold.  Want to move to a new town?  You’ll need a job with an income sufficient to pay for your debt, and you’ll need to sell your house before you can buy a new one.  Tired of your car?  You can’t sell it because you owe more money on it than it’s worth.  Have a great opportunity to travel to a place you’ve always wanted to visit?  You can’t take the time off, and you don’t have the money saved up to go.  Hate your job, or worse, discover that your career is unsatisfying?  You’re stuck because your monthly payments are too high to switch to something new.

Saving, on the flip side, acknowledges not only that you need to be prepared for the problems of the future, but that you want to have resources at your disposal to seize the opportunities that come your way.  Want to move to a new town?  Sell the stuff you don’t need, get a few leads on some work if you need them, and get going.  Tired of your car?  Sell it and get something else (or go without).  Have a great opportunity to travel?  Plan a leave of absence and head out!  Hate your job, or worse, your career?  Feel free to get started on the next chapter in your life.

In short, money is a tool that you can use to achieve happiness.  It certainly isn’t the only tool, but it’s an important one.  Using it wisely requires that you know yourself and what makes you happy, and you understand that as you grow and change, your wants and needs will grow and change.  While our site isn’t designed to help you live a deliberate, centered life, there are a few resources we recommend to do so.  Franklin Covey’s The 7 Habits of Highly Effective People, while centered a bit too much on an upper-middle class suburban existence, has a great process to follow to think through what is important to you and how to get there.  And David Allen’s Getting Things Done: The Art of Stress-Free Productivity is such a great way to organize your life that he has spawned what Wired magazine referred to as a cult of hyper-efficiency.  Covey’s book especially can take you to additional resources on how to live a successful, meaningful life, but honestly — whatever helps you discover more about yourself, and how to make good choices, go for it.

This month we’ll explore:

  • The Basics of Tracking Your Spending and Building a Budget: This is the single step with which your journey starts.  Sure, you can cut down on your spending, even significantly, without knowing where your spending is going.  But finance is, at it’s most basic, an exercise in math.  If you bring in more money than you spend, you’re living below your means.  If you don’t, you’re not.  Tracking your spending isn’t everything when it comes to living below your means, but it’s hard to be successful without it unless you institute an all-cash system.  Fortunately, there is a whole industry building computer software to help make it simple, and some of it is free.
  • The Basics of Debt and Savings: Debt means giving up opportunities in the future for a lifestyle today.  It is a very dangerous gamble.  You will also see how to use debt as means to manage your cash flow and take risks to increase your wealth.  If you have consumer debt now, you’ll need to first and foremost – stop digging the hole deeper!  Next, you’ll need to pay that debt off as soon as possible and free your future from the tyranny of your past decisions.  Savings, on the other hand, gives you freedom.  It means you have protection from the unexpected and resources that you can use to seize opportunities.
  • The Basics of Spending Wisely: Tips and tricks for spending the least amount possible on things that aren’t critical for happiness and health.
  • The Basics of Living Richly: Spend your money on things that bring you true satisfaction and happiness.  Spending as little as possible for everything else.  Knowing the difference isn’t always easy, and we focus on tools and techniques to help you get there.  To start, realize that most millionaires are ordinary people who live modestly.  And, as this study shows, money doesn’t necessarily bring happiness beyond a certain income.
  • The Basics of the Investing Smartly: Keep tabs on the economy and investing opportunities.  While we aren’t a strict investing site, nor are we financial advisers, we do report on happenings in the economy so you can make educated decisions about where to put your hard-earned savings.  We also believe that, like personal debt, government debt is very risky and the government’s inflationary and spending policies are significant risks to personal well-being and to our country’s future.
  • Common Pitfalls: Identify common pitfalls on your way to financial independence, and share the stories of people who share your commitment to living well by living below their means.

 

Thumbnail Photo: Blocks 1 by Crissy Alright

Story Photo: Frits Ahlefeldt-Laurvig

Youth Savings Accounts, a good deal you probably aren’t taking advantage of

May 10th, 2011

Recently, my wife and I celebrated the birth of our son.  Many of our friends have also recently had kids and, through casual conversation, I learned nobody really had good plans in place for saving for their children’s future.  I am not talking about 529 Plans or other college savings plans; I am talking about putting away some money that can be used for anything in the future; be it their first car, their first house, braces or maybe even their first business.

Since we live in Washington State, we are taking advantage of at least two deals for young savers:

  • BECU offers an APY of 6.17% on up to $500
  • Watermark Credit Union offers an APY of 3% on up to $500

Using this method, my son will earn an average interest rate of approximately 4.6% per year on $1000 of very liquid money and, because his total unearned income is below $950, he won’t pay income taxes on the $46 or dollars of interest.  Because it’s my son’s money, he will have $16 dollars more than I would have, even if I was able to match the interest rates, which is unlikely.  This makes for a pretty good, albeit small, tax shelter for the average family.

Note: While the interest rate on the first $500 or so is usually good, the interest after that is typically pretty low.  This means the compounding of interest earned on the $500 will be at a lower interest rate.

The deals I am taking advantage of are relatively small, but depending on what you are eligible for, there are other credit unions and banks offer the higher rate on larger sums of money.  For example, if you work for Chevron or meet other membership criteria, the Chevron Credit Union offers:

  • $25 initial deposit for newborns
  • 7% on up the first $1000 in a MySavings account
  • CFCU Youth Rewards, contests and more…

There are plenty of other youth account / kid’s accounts / early saver account deals out there.  This site provides an excellent search tool.  Some banks offer better than normal rates, and others offer other perks like sign up bonuses, reward programs and more, which (depending on the deal) could still make it worth it the effort.

Custodial Account – Advantages:

  • You are putting money away for the child – Unlike 529 or other such savings methods, savings accounts have 100% flexibility and can be used for any purpose.
  • It’s tax-free up to $950 in earnings – The money grows and earns interest federal tax free and you don’t even need to file a return for your child, so long as:
    • The total unearned income (interest / dividends) is less than $950
    • The child remains unmarried
    • The child is under 19 or a full-time student under 24

      Note: This assumes we are only talked about unearned income from Youth Savings Accounts, etc.  If your child is earning income, there are other rules that dictate whether they need to file.

      Important: Be sure to consult your tax adviser and the IRS to determine your individual tax advantages of this strategy.

  • Between $950 and $1900 of earnings it’s only taxed at 10% – For returns above $950 the child is probably in a lower tax bracket than you (usually 10%) and thus the unearned income is still taxed at favorable rates.
  • The child earns above market returns – Depending on the deal you find, the child can earn as much as 6, 7 or even 10% on between $500 and $1500 in various youth or early saver accounts.
  • The money is safe – So long as you are taking advantage of a savings account at an FDIC or NCUA insured institution, the likelihood of you losing this money is exceptional low.
  • You’re still in control (but) – Parents still have full control the money and the account until the child is 18 or 21 depending on the state.  As long as you use the money “for the benefit of the child” you are in the clear.
  • These accounts are usually free and include other goodies! – These accounts are usually free, have very low or no minimum balances, and sometimes include other goodies such as stickers, toys and bonuses designed to making “saving fun”.

    Note: If the deal you find is not free, or has too many strings attached, it is probably not worth it.  Be sure to read the fine print.

Custodial Account – Disadvantages:

  • This takes time to set up and manage – Although the time is generally pretty minimal, for our $500 Early Saver account, the process took about 20 minutes (including drive time) and we expect it to ideally take no additional effort for the next 18 years.  Because the account is for a minor, you may be required to show up in person.  BECU for example does not let you create accounts online for persons under the age of 13.
  • You are gifting the money – To take advantage of this plan, you are gifting the money to your kid.  While you still have control, legally the monies must be spent only for the benefit of the child.  In addition, there are possible tax implications, such as the $13k a year gift tax exemption that is reduced from your individual $1M life time exemption.
  • Eventual Loss of Control:    When your child no longer qualifies for the benefit, they also get full control of the money.  Young adults might not make the best decisions with the money you have saved up for them.
  • You may need to file a tax return for your child – Depending on how much you are gifting, and/or how much interest the child earns from that money, it may be necessary to file a tax return.  The following IRS site has more details on rules for filing requirements for children with unearned income such as we have discussed above.  Be sure to consult your own tax advisor.
  • Beware of the “kiddie tax” – This tax is really designed to prevent the very wealthy from moving large amounts of assets to their children to avoid taxes.  Unearned income that is earned by your child over $1,900 a year will fall under the kiddie tax and have to be carried over to your tax return and thus taxed at your tax rate.  This basically means the “shelter effect” of this tax strategy is limited.  You can read about a few gotchas of the kiddie tax here.

Regardless of the disadvantages, children’s accounts are still something to consider. Assuming you have the extra cash and the advantages outweigh the disadvantages, it is possible to scale this up.  The following table shows the benefits of the above strategy assuming a gift of $26,000 put into a 2-year CD at 1.5% on January 1st, 2011:

In this example, the strategy saves $277.04 in federal income taxes.  Assuming interest rates increase, you get a better CD deal, or you increase the amount gifted and took maximum advantage of this approach the results are even better:

This results in a theoretical maximum $570 in federal income taxes.

Vacation Tips: Creating spending budgets for your kids

May 3rd, 2011

Summer time is fast approaching, and along with it the mainstay of American family life – the summer vacation.  Whether you’re traveling or having a ‘staycation’, it’s easy to blow your budget with little extras.  You’re on vacation and you deserve it, right?  Well, at BYM we think the best vacation is one where one month later you’re not cringing when your credit card bill comes, and we’ll be posting tips throughout the next few months on making the most out of your dollar when traveling.

http://www.sxc.hu/photo/1339614Our first tip involves money and kids.  One of the best parts about a family vacation is seeing those little faces light up at all the great things that are happening.  But that can easily add hundreds of dollars on your total vacation expense, especially if you’re in a tourist spot like a theme park or a popular beach.  Keep control of your spending by setting a total budget for each kid on the vacation.  Be realistic here – if last year you charged up $20-$40 per day per child on candy, snacks, games, toys and souvenirs, don’t think you’re going to stick to $20 for the whole trip.  Set something reasonable that you can afford.

Once you’ve set a realistic budget, involve your kids in the spending decision.  The way we handle it in our family is to say “You have $40 for the weekend.  You can spend it on whatever you want, but when it’s gone, it’s gone and there will not be any more.  Have fun!”  You’ll love the peacefulness that comes from not having to grant or deny 50 requests every day from the “can I have this?” crew.  And you’ll be amazed at how much fun the kids have with the very grown up experience of making decisions.  You’ll also be surprised at how quickly the kids learn to be judicious with their money – much more judicious than they were when they were spending YOUR money!

If you have younger children, you should probably divide up the spending for them by giving them a daily limit, or even a before-lunch and after-lunch limit, otherwise they will blow all their money on the first day.  Younger kids don’t have a firm enough understanding of time, or of delayed gratification.  So break that $40 for the weekend into $20 on Saturday and $20 on Sunday.  It will be much easier for a young one to save up for a more expensive item by stashing some cash on Saturday then it will be for them to go all Sunday hearing “Sorry, you’ve already spent your money.”  (and it will be much more fun for you too).

If your kids have never had to make these kinds of financial decisions before, start before vacation so you’re not combining the excitement of the trip with trying to learn a new skill.  Take the kids to the mall, or a summer festival, and give them each a small amount of cash to buy whatever they want.  They’ll get the hang of it pretty quickly, and you’ll partner with them in their decision-making process instead of being the authority figure that decides whether they can have something or not.

If You Are New to Living Below Your Means: It will help your kids to see you going through the process of making tradeoffs yourself.  So let them see your own budgeting process, and set your own realistic limits on your spending for dining out, hotel, car rental, etc.  It will help keep you honest when you know you’ve spent enough for the day, but your credit card is right there tempting you to go over-budget.  It’s much harder to lie to yourself and say it’s OK to go over your budget ‘just this one last time’ when you know your kids are watching, and learning, from your actions.

Diesel cars continued…

April 12th, 2011

As a follow-up to my previous post about Diesel cars being “worth it”, I wanted to provide everyone with a list of other useful articles and links regarding Diesel and provide a simple diesel fuel savings calculator.

Here are few good links:

Cheers,

Are diesel cars “worth it”

March 31st, 2011

Having recently purchased a new diesel car, I am often asked “is it worth it”.  The question is based on some combination of three basic presumptions.   First, it is presumed that diesel cars cost more when compared to traditional gasoline automobiles.  Second, it is presumed that diesel fuel costs more than traditional unleaded gasoline. Finally, it is presumed that diesel cars in some way under perform gasoline automobiles. Thus the question is really: “Given the presumed problems with diesel cars, are they worth it?”

The short answer, for those that want to skip the article below, is Yes – at least in my opinion.   But please read on to understand why.

This post is based on my recent experience with the new BMW 335d.  Of course buying a BMW is not exactly a thrifty thing to do… but I assure you it was within my means.  Besides, if you can’t spend the money you save on things you want every now and again, what’s the point?  Anyway, I purchased a new 2011 BMW 335d in the fall of 2010.  I made my decision based on the premise that gasoline prices were sure to continue to rise (You can’t print trillions of dollars and not have the price of commodities not go up) and that by burning fuel more efficiently I would be not only saving some money, I would also be “helping the environment”.  That and my wife said I was too young for a 5 series.

Here is how things have broken down.

First, the 335d actually cost me about 10% less (~$4k) than a similarly equipped 335i.  Despite the fact that the 335d has a base MSRP of $2k more than the 335i.  This was the case for several reasons:

  • BMW provides a $2500 to $4500 “eco-credit” depending on the month (In my case I got $3500).
  • BMW provides generous finance between 0.9% and 4.9% (In my case I got 0.9% for 3 years and yes sometimes debt is “ok”)
  • The government provides a $900 Tax Credit for the purchase of a certain fuel-efficient vehicles.
  • I was able to get a very good deal by using the “Internet sales” division of several dealerships.

Worth It #1 – At least in my case, the diesel car actually cost less.

Second, while diesel fuel does cost more than unleaded, it doesn’t cost that much more.  Where I live at last check, a gallon of diesel goes for $4.05 while a gallon of premium unleaded (required by the 335i) goes for $3.99.  So the gas is indeed a full 2% more expensive and it is 8% more expensive than regular unleaded at $3.79.

But based on my driving experience for the last 2500 miles, I am getting an average of 31.3MPG with my car.  BMW advertises the 335d as getting 23MPG city and 36MPG highway… I am seeing about that.  If you assume a 50/50 mix this averages to 29.5MPG.  The 335i on the other hand is advertised as getting 17MPG city and 28MPG highway or assuming a 50/50 mix an average of 22.5MPG.  If we give the 335i the same mix as me, this would mean an average of ~24MPG.

This means that based on BMW’s numbers and some of my own experiences the 335d gets about 24% better gas mileage.  It doesn’t take a math wizard to see that if the fuel only costs 2% more and you get 24% more bang for the buck it the diesel is the way to go.  Base on my driving, this means I will save approximately $190 a year in fuel costs.

 

Worth It #1 – At least in my case, the diesel fuel actually cost less.

Finally, what do you sacrifice by getting a diesel?  Fortunately, the days of the old smoke bellowing diesels have long since past.  Today’s new “clean diesels” burn clean with no perceptible smoke from the tail pipe.  But the reality is that it depends on the diesel.  In the case of the 335i vs. 335d you do give up some 0-60 time (5.6s vs. 6.0s) so if I gun it of the line, it takes me an extra 4/10ths of a second to get there.  The 335d is also a little heavier (~250lb), so I imagine the handling may slightly hindered.  I will say the car is a BMW and with the M-suspension package I have not noticed any handling problems.  The one place the 335d spanks the 335i is in torque (125 pound-feet more than the 335i).  I find that this is most noticeable in the 60 to 80 range, where the car is a real sprinter.  The only other thing I will say I noticed was an occasional “burning” odor for the first 1500 miles or so, but that has now gone away… I have read this is normal as the car “burns in”.  No idea if this is related to it being new or a diesel.  So when it comes to sacrifices I don’t really see any.

Worth It #1 – At least in my case, the diesel performs just as well as a non-diesel so we can call this a wash.

Of course you don’t need to buy a new car to save on fuel costs.  Consider these tips instead.

Cheers,

This posting is provided “AS IS” with no warranties, and confers no rights.

This should be obvious, but don’t buy overpriced HDMI cables

December 19th, 2010

This is actually true for almost all digital cables.  This image explains why.

The same is true for DVI and fiber optic cables.  The only exception I think I would make is for Ethernet cables.  The difference between the $2 for 14ft and $5 for 14ft is probably worth it.  So I am not saying spend a lot, but a little more on well made network cable can save you some trouble.  Amazon Basics seem to work great and are a great price.