Money For Your Old Cell Phone

Posted By Paul

A while back I heard of a web page that lets you trade in old cell phones and iPods for cash.

The page is:

http://www.flipswap.com/

Conveniently I had two old cell phones that were just sitting in my desk drawer collecting dust.

I went online and found out that I could get about $15 for both cell phones. I decided to give it a try.

I registered and traded in both phones. The registration was easy, and the trade in process consisted of a page where you told them the model of your phone and answered some basic questions about its condition. Based on that info they tell you how much they will give you for it.

Then it was an easy thing to print out a mailing label from their page. I taped the label on the envelope and dropped it in the mail.

It took about a month to go from dropping the envelope in the mail to actually getting my payout (I chose an option of getting Amazon store credit since I figured that would save me some time since I wouldn't have to wait for them to print and mail a check).

So I got rid of two cell phones I had no use for, and made about $15 (minus the cost of the envelope).

Overall the process was very cool. I received emails from flipswap when my phones were received and inspected. My only complaint is that once I got the "received and inspected" email I was not sure how to actually get my Amazon credit. I waited a week to see if I would receive an email gift certificate, but nothing. I was about to email their tech support when I discovered that by checking the status of my Flipswap trade I could see an Amazon gift certificate code that gave me my credit.

In addition to cash or Amazon credit you can also choose to donate your money to charity.

Some phones don't have enough resale value to justify a payout and those only give you the 'plant a tree' option where Flipswap recycles the phone and plants a tree.

Overall I would highly recommend Flipswap. Instead of having your old phones sit in a drawer you can trade them in for cash or at the very least recycle them.

Frugalizing a friend.

Posted by Matt and Paul

Recently we were asked by a good friend of ours to go over their finances and see what we thought.

In exchange for our advice, our friend said that we could post any lessons learned to our blog. So here goes:

Generally our friend was a breeze to Frugalize, mostly because they were already there. Here are some of the highlights we saw:

-They were totally aware of their monthly expenses. They couldn't quote their monthly expenses for car insurance from memory, but they were able to put their hand on the right document within minutes. The key point here is that THEY KNEW WHERE THEIR MONEY WAS GOING.

-They had a great emergency fund in place.

-They had medical insurance.

-They were saving.

-They had zero credit card debt.

-They were living within their means (which you could probably assume from the fact that they had no credit card debt and had been able to save).

This person had the kind of finances that I HOPE every American does, but everything I read suggests that they are by far the exception.

So to be honest we could have stopped at this point and said to our friend that all was good, but we kept looking for small details that might be helpful. Here's what we found:

1) Since they drive an older car, and plan to drive it into the ground, we suggested that they reevaluate their car insurance, and possibly drop their comprehensive and collision coverage (see previous article from Matt: The diminishing returns of comprehensive auto insurance coverage ). If they didn't want to drop the coverage entirely we suggested that they at least increase the deductibles to save some money on their policy.

2) They had a universal life insurance policy that had a death benefit of $15k and cost them about $90 a year. We suggested that they cash out the policy. If they wanted to have life insurance then that's fine, but since they were single and had no kids we didn't see the need to pay for life insurance. The way the policy is written, if something tragic did happen to our friend, their parents and siblings would split the $15000, which is a pointlessly small amount in relation to the rest of their estate.

3) Since their income varies somewhat we suggested that they increase their rainy day fund.

4) We helped them clarify their savings goals. They were doing a great job of saving so we just had a quick discussion about what they were saving for. The rainy day fund and retirement came up immediately (which is great), and they were also interested in saving up for the purchase of a new car someday. We suggested that they open a dedicated "new car" savings account. Separate savings accounts facilitates tracking progress toward each goal.

5) We suggested that our friend could simplify by getting rid of some credit cards that they never use (keeping a few for convenience). It's possible that this could negatively impact their credit score, but their credit was already good so we felt it would not be a problem.

One final thing that we learned from this experience is that good intentions are important, but thinking about and talking about personal finance are part of the equation too. Not everyone finds personal finance as interesting as Paul and Matt do, obviously, but it seems that the American public's reluctance to discuss personal finance could really be holding us all back. We (Paul and Matt) found it immensely valuable to be able to bounce ideas off of each other and I hope our friend feels that they have gained from joining the conversation as well.

Millionaire Next Door Review Pt. 2: UAW or PAW

Posted By Paul



Part 2 of my ongoing review of this great book. The book mentions this interesting little calculation to determine your wealth accumulation status. The authors believe that financial independence is not just about income, it's about increasing your wealth, and that wealth accumulation goals need to relate to your income.



Essentially they're saying: "Try to save and invest as much as you can, and the more money you make, the more you should be able to save and invest."



So they use this simple calculation:



1) Take your total income

2) Multiply that by your age

3) Divide that total by 10.



Your answer is what they suggest should be your net worth. If you are significantly below that number then you are an Under Accumulator Of Wealth (UAW). If you are significantly above that number then you are a Prodigious Accumulator Of Wealth (PAW).


Of course I think back to what this calculation would have been at various times in my life, and it falls apart a little. For example, when I was 22 and had my first job, I was making a salary but my networth was negative (since I had a car loan, student loans and hadn't started saving at all), so I would be considered a dangerous UAW, but these are probably edge cases that get lost in any 'rule of thumb' calculation.


Anyway, take a second and calculate out what the authors consider to be your target net worth (so far the book doesn't say way what to do if you're married, I would suggest using total household income in step 1, and average age in step 2), and see if you're on track by their standards or if you're a UAW or a PAW.

What to do with $500

Posted By Paul

One question I've been asked before is: "What should I do with my windfall?"

I thought I would answer that question for a windfall of say $500 (which seems to be a common amount).

Here is some ideas that I suggest to people (in approximate order of priority):

1) Do you have a decent sized emergency fund (3-6 months worth of living expenses, though more is always good)? If not then consider putting the $500 towards that.

2) Do you have credit card debt? If so then consider putting the money towards that.

3) Have you put all you can towards a Roth IRA for the year? If not, then consider putting the money towards that.

4) Do you have kids? Then consider saving for their education. See: 529 Savings Part 1 and Part 2.

5) Do you have any non-mortgage type of debt, like a car loan or student loans? You may want to put the money towards that and get your loan paid off that much earlier.

6) Do you have mortgage debt? Paying off your mortgage early isn't a huge priority, but if it's something you'd like to do, then go for it! If you don't have any mortgage debt then you either rent (consider saving the money in anticipation of someday buying a home), or you've already paid off your mortgage entirely (in which case I envy you).

If you already have an emergency fund, have no credit card debt, fully fund your Roth, are on top of college savings for your kids, have no car or student loans, and no mortgage debt, then I would say it's likely that you're pretty on top of your finances. At this point perhaps you should put it towards a cool vacation or something fun, as it sounds to me like you deserve it.

The Millionaire Next Door Pt 1: Big Hat No Cattle?

Posted By Paul



Hi Everyone,

I've started reading this cool book called The Millionaire Next Door.

The basic idea behind the book is that the authors did a lot of research on wealthy people and were surprised by what they found. They found that many of the things people envision when they think of a millionaire (where a millionaire is defined as a household that has a net worth of one million dollars or more) are false.

I plan on doing several posts as a sort of on-going review of the book, but I wanted to start off with one of the first ideas that the book describes. The idea is that there are numerous people out there who:

1) Live in upscale neighborhoods.

2) Drive expensive foreign cars.

3) Wear expensive clothes.

4) Aren't millionaires

The book describes this phenomenon using a cattle rancher term of: "Big hat, no cattle." Meaning a person who has the trappings of a very successful life, but who is living paycheck to paycheck and has very little net worth.

This reminded me of an article in an earlier post: Life And Debt In Suburbia.

So keep in mind as you look at your life with a frugal eye, that you shouldn't focus on just your income when evaluating your life. Let's say you make $300,000 a year, but you spend $295,000 of it every year. Each year you'll manage to save $5,000. Compare that with someone who makes $50,000 a year but manages to live off of $42,500. They save $7500 a year. The first person has a great income, but the second person is actually accumulating more wealth and one of the points of this book is that it's wealth accumulation that's important when looking at financial independence.

Don't let yourself be one of those people with a big hat and no cattle.

Beware Of Subscriptions

Posted By Paul

There have been several articles posted that relate to being wary of subscriptions (Paying for Storage, Lower My Cable Bill Please) but I think it's such an important point that it justified its own article.

Here is an example of how I look at spending. Not too long ago I really wanted to buy a DVD of a movie I like. It cost $16. I bought it and watched it, and I might pop it in and watch it again on a lazy Sunday afternoon, but when it comes right down to it I certainly didn't need to buy the DVD and you could certainly make the argument that the $16 was spent frivolously.

However at least it was a one time cost that is over and done with.

Now compare that to something like a gym membership, or yard care service, or a fancy cable package. These are things that you generally have to pay for month after month until you take the initiative to cancel them.

It's not that it's bad to have any of these things (provided you can afford them and the value you derive from them is worth it to you see the article Paying For Convenience), but I think it's important to think hard before you sign up for extraneous things that involve a monthly fee.

It's so easy to just get used to a monthly fee (especially if it's just $10 a month or something like that), but you stack up enough $10 a month costs and they start becoming significant.

So many businesses are switching over to subscription based services because they like the idea of making money off of their customers whether or not you use their service in a particular month.

Again, I'm not saying you are being frivolous if you use one or more of these services (I subscribe to some of them myself), but it's important to take an extra few minutes to weigh the pros and cons of something that involves a repetitive fee.

So take a quick look at your monthly services. Do you really watch those premium cable stations all that much? Do you subscribe to the 4 disk Netflix plan when you could probably get by with 2? Could you get rid of the premium cable channels and just watch the shows via Netflix when they come out on DVD? Maybe you haven't logged into your World of Warcraft account for over a year. Do you subscribe to the newspaper but never seem to find the time to read it?

For example, I used to have extended cable, but decided to try the basic package where I only get channels 2-13 plus a few others. I discovered that many of the shows I watched so faithfully on those extra channels faded from memory quickly, and the few shows that I still REALLY wanted to watch came out on DVD and could either be borrowed from friends, put in my movie queue, or in rare cases purchased. Overall I don't really miss those extra channels and the savings is significant.

It's not that you shouldn't ever pay for services that aren't basic needs but it's good to periodically look them over and make sure that the money you're paying for them is still worth it to you. Maybe it's worth it to try cutting off one service, save the money instead, and then give it six months and see if maybe the service wasn't as important to you as you thought.

Cash stash horror stories

Posted by Matt

I recently read a great article about an obscure government group called the Mutilated Currency Division (part of the Department of the Treasury's Bureau of Engraving and Printing). There are 17 examiners in this group whose job it is to identify mutilated currency and send checks out to the "victims". Good to know, in case your money is ever damaged in a flood, fire, etc., but the amazing stories of how the money gets damaged should also convince you not to try to store it yourself. One important quote:

Despite sales claims, Robinson [a retired director with 30 years experience] has yet to see a fireproof home safe. "We've had quite a few that didn't live up to promises. If the metal gets hot enough, it's going to burn what's inside," she says.

So, right now, go get your money out of the mattress/cookie jar/freezer/flower pot and take it to the bank. You're supposed to be earning interest on that money, anyway!