Are Services Like Geek Squad Worth It?

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I know it has been a long time since I’ve posted anything, but I thought this would be a timely post given how many people will be shopping this week and many of you may be purchasing computer equipment.  I hope this perspective is helpful to you.

I recently bought a new laptop from Best Buy and I purchased several of the ancillary services to protect my laptop in case it was defective or I ran into some other problem like a a computer virus.  The folks at Best Buy did an excellent job in selling me these services, each of which didn’t seem to cost a lot until I added them all up.  I almost paid as much for these services as I did for the laptop itself (over $300 in services for a $450 laptop).  I signed up because for some reason I thought I needed them.  And a week after purchasing the laptop I did have an issue. I took my lap top to the Geek Squad – an in-store computer repair service.  After waiting in line patiently, I finally got my turn. And after explaining my problem, I was told to leave my laptop. They said they would take care of the problem in four days. FOUR  Days?!?!?! Who can live without her laptop for four days? I was outraged! Geek Squad’s response was that four days was good because normally repairs take seven days at this particular location and ten days at a neighboring store.  This got me to thinking about whether these services are really worth it? I had my last laptop for three years and I only had one incident after the warranty period expired. Fixing that only cost me $80 and less than 24 hours.  Luckily, I was able to return the repair services since it had been less than 30 days from the laptop purchase.  I think I’ll take my chances. Assuming my previous experience holds true next time, I can have almost four problems, pay for them out of pocket, and still break even.  Or I can pay $150 more and buy a new laptop if this one fails.  I think I’ll play the odds, because there is a good chance nothing will happen and I’ll have saved myself $300.

Costco vs. Amazon

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Earlier this month, Ron Lieber wrote an article in the New York Times comparing shopping at Costco to shopping on Amazon.  As the online seller continues to expand its product offerings, you can now purchase many of the staples you would normally purchase at Costco or other warehouse stores with the click of your mouse.  With Amazon’s Subscribe & Save service you can set up a regular recurring list of products that will automatically be delivered to your front door.  So you never have to worry about running out of toilet paper and paper towels and you don’t have to wait in long lines to pay or have an SUV parked outside to haul all of these bulky items home.

Mr. Lieber put together his standard list of staples and purchased one batch from Amazon and compared that to what he would have payed at Costco.  Overall, Amazon was 17 percent more expensive. But, Mr. Lieber reasoned that the time he saved buying online was worth the extra cost. Costco trips are not quick.  One of the only downsides for Amazon,  Mr. Lieber concluded, was the environmental waste that came with the shipping and all of the packaging.

So I started to think about this for myself and wondered whether I would give up my Costco experience to save time.  I don’t think so.  For me, Costco is an experience I love having.  I love going to Costco and seeing the seasonal items, buying their rotisserie chicken, getting my eye glasses and contacts, and buying gift items.  I’ve purchased so many high quality items like furniture that I would never have known about without making a trip to Costco.  So, I don’t think I’ll be giving up my Costco membership anytime soon.  What about you – Costco or Amazon?

Are gift cards truly a good gift?

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With the holidays just over many of you probably received a gift card or two.  TowerGroup, a research firm, estimates that sales of cards reached around $91 billion in 2010.   So I got to wondering whether gift cards truly are a good gift. Did you know that many gift cards go unused (or get lost) and merchants count on this?  They are a highly profitable product for many merchants since many people don’t actually use them.

I’ve received several gift cards to merchants I don’t frequent or are out of the way. I’ve felt compelled to use them anyway and end up buying items that are unnecessary.  When this happens, I think of my childhood and how my parents often gave my sister and me cash as gifts.  I am of Indian heritage and it is customary in our culture to give cash or gold jewelry as a gift.  As a child I hated receiving cash because I loved the thought of opening a present and not knowing what was inside.  As an adult, though, I like the Indian tradition.  I like being able to save the small amounts of cash gifts for a large purchase.  I’ve bought furniture, mountain bikes and PDAs using cash that I saved this way.  As a mother of two, I love it when I receive cash for my kids because I can deposit it in their 529 accounts or save it for a large purchase that they are eying.  How many more toys do they need?  When close friends or family ask what my kids need, I usually answer honestly. If they need a new pair of pajamas or have been coveting Candyland I say so. Then the kids receive something they like or can use, something I would have purchased anyway.  As my children get older, I will let them have the cash so they can decide what they want to buy. This also gives them the added gift of learning how to spend money, make choices, and save for something they really want.

With a gift card you don’t have the surprise element of what’s in the box. It’s almost like cash but it requires you to spend it at a particular store.  So if you aren’t going to come up with something creative why not just give cash so the recipient can spend it at any store or at multiple stores?  I bet people don’t misplace cash as often as they misplace gift cards.

Tips on Picking a Financial Advisor

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A few months ago I got into the car to drive to an early Saturday morning meeting and found the radio set to a sports station. (My husband had driven the car the day before.)  I didn’t turn the dial immediately because, when discussion wasn’t about the SF Giants, the Gary Allen show was giving out financial advice.  I had never heard of Gary Allen, but because of my role with Finomical, my interest was peaked.  I still don’t know much about him and I have not listened to his show since (primarily because I wouldn’t know where to find it on the radio dial since I don’t follow sports).  But that morning when I was listening, I thought his financial advice made sense. His topic was what to look for when you are choosing a financial adviser.  Here are some tips he mentioned that I thought were particularly helpful:

  1. You should make sure the firm you are considering to manage your investments does not hold custody of assets.  Bernie Madoff is an example of what can go wrong when a firm holds custody of the assets.  By having a third party hold custody it reduces the likelihood of the books being cooked.  Examples of custodians are State Street Bank, HSBC and Bank of New York Mellon
  2. Consider not using a financial adviser who is part of a larger brokerage firm.  They are often biased by products that their company manufactures and get paid better commissions when selling these products.  Obviously, many financial advisers are affiliated with large banks and investment houses, so if you go with one of them be careful that they aren’t pushing products not suited for your portfolio.
  3. Lastly, understand how your adviser makes his or her money. Is he on a commission, a retainer fee, or is he paid a certain percentage of your assets under management.  How advisers get paid will definitely influence their recommendations.  Today most advisers are paid based on a percentage (usually 1-2 percent) of your assets.  So if you have $100,000 in your account each year the adviser will take between $1,000 and $2,000 regardless of how much money was made or lost on your portfolio.

For more tips on what to look for when hiring a Financial Adviser check out the worksheet on Finomical.

New rules regarding your reimbursement for qualified health care expenses

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With 2010 just having ended, many of you may have just finished enrolling for your 2011 benefits.  One of the important changes that has occurred is a change in what is accepted as qualified medical related expense for your pre-tax Medical or Health Care Flexible Spending Account (FSA).  The HSA, HRA or FSA are all types of accounts in which you have money deducted from your paycheck pre-tax to help pay for any medical related out-of-pocket expenses typically not covered by insurance, such as co-pays, medicines, etc. In years past, you would have been reimbursed for over-the-counter medicines, such as Tylenol or Advil and other care related items like contact lens solutions.  I know in past years when I have not used up all the dollars in my HRA account, I have just stocked up on over the counter items that we use regularly.  However, beginning in 2011, you will not be able to expense these over-the-counter items unless a doctor has prescribed them, with the exception of insulin and diabetic supplies.  So if you are counting on these items to be a part of your accounts you will have to be more diligent about asking your doctor to prescribe them so you can be reimbursed.  I recently noticed that Walgreens is marking on the receipt the items that are eligible for HSA accounts.

Currently, there is ongoing debate about how useful is it for a doctor to be have to spend time prescribing over-the-counter medications, so hopefully, this rule will be repealed. But in the meantime you will have to be mindful of which costs are eligible and which are not.  It’s still early in the year, so you have time to plan this out so when the year is almost over you’re not left scrambling to use up what is in your account before losing those funds.

Are discounts on sites like Groupon, Living Social, etc. really worth it?

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Recently I signed up for Groupon and wanted to see what all of the hype was about.  The first couple of weeks it was exciting seeing what deals were available everyday and I purchased a few items.  Then I got tired of the extra email so I unchecked the box that said send the deal to my inbox.  There were more days when the deal wasn’t interesting. Do I really want lasik eye surgery done by someone who needs to hand out discounts or jump out of plane at half price? Not really.  Around the same time I was trying out Groupon I came across Restaurants.com. The Web site sells discounted coupons for local restaurants; I bought a few of those too.

Now I have purchased about 10 of these deals but I’ve only used two –one from Groupon and one from Restaurants.com. Neither turned out so well.  On Groupon I purchased a gift certificate for an ice cream cake from an ice cream parlor on the other side of town. The place received great reviews on Yelp.com, but I’m not sure why.  When I purchased the cake I ended up paying $7 more than my Groupon certificate because of this and that extra fees.  The cake, for my daughter’s birthday, was gorgeous! It was a dream cake with beautiful pink ribbons.  We took it home, sang Happy Birthday, and dove in.  It tasted awful! I have never tasted an ice cream cake so dreadful! I’ve heard many vendors who post on these deal sites get more traffic than expected and as a result service falters.  So I don’t know if the poor tasting cake was a result of that or if I just don’t like this vendor.  Nevertheless, I won’t be going back.  In retrospect, I wish I had just paid full price at the place we normally go closer to home. It would have tasted so much better and even been a few dollars cheaper. Maybe it wouldn’t have looked as pretty, but at least it would have been edible.  So, the first purchase didn’t go so well.  But the second one – the one I bought through Restaurants.com — I didn’t even get to use. We went to the restaurant and were told our coupon would not be accepted. They said Restaurant.com had oversold them and they were in dispute.  Since we were already at the restaurant on a Saturday night, we decided to stay and eat there anyway.  Big mistake! It was a terrible restaurant with mediocre food at best.  Now, this restaurant isn’t a place I normally go. It’s not even on my list of places to try out. But because of the coupon I decided to try it.  It is not a place I would ever try at full price.

On the coupon front I am now 0 for 2.  I need to quickly use a few of the other coupons before they expire and I lose all of the money I’ve invested in them. So far I don’t think these sites are really such a deal.  Do places that are really good and get enough traffic ever give a deal? Or is it just the mediocre places that have to resort to giving you a coupon to come in? On the other hand I get discounts from quite a few of the vendors I visit regularly without having to buy any coupons in advance.  I get these discounts just because I am a regular customer. I think I like this option better than paying upfront for an unknown experience.

What do you do if you haven’t received your W-2 or 1099 by February 1st, 2011?

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It should have been in your mailbox by Monday.  By law any employer you worked for in 2010 needs to send you a Form W-2 or Form 1099 by February 1, 2011.  The amount you earned through the employer should be on this document and this is the amount you should use when filing your 2010 Federal and State Income taxes.  If you have not received this document, wait a few more days and then you should certainly contact your employer’s payroll department and ask for the status.  If you still don’t have your form by February 16th, it is recommended that you contact the IRS and notify them of your attempt to contact your employer and not being able to reach them.  See the following tax tip from the IRS website.

If your employer is no longer around then clearly you have no one to call. Now you’ll have to take matters into your own hands and likely have to reconstruct the W-2 or Form 1099.  Look at your last pay stub for 2010 and find the year to date (YTD) salary amount – this should reflect your gross earnings before any deductions.   It is your responsibility as the employee to report this income regardless of whether you receive a Form W-2 or Form 1099.  The employer has a whole other set of rules and regulations that they have to follow as employers and that is not what I intend to discuss here.  If you do not receive your W-2 or 1099 information by April 15th (April 18th this year), you, as the person who earned the income is still responsible to report the income on your income tax return in a timely manner.

“Value Spending” vs. “What’s your Budget?”

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I’m sure most of you have heard about Value Investing – Warren Buffet is famous for being an example of a Value Investor.  Simplistically, the idea is that you find investments that are under priced and buy them before the market or others find out about it.  This is definitely a valid investment philosophy, but I think the same type of philosophy should be applied to how we spend our money.  We should practice “Value Spending.”  We should apply this philosophy to how we purchase items.  Look for items that have value, rather than shopping on a budget.

There is nothing that annoys me more than when a sales person asks me “What is your budget?” I always answer back,  “It depends.”  To me it is a sign that the person does not know the product line well and wants you to make a quick decision so he or she can move on (or effortlessly collect their commission).  Recently I went shopping for a new plate set at Bed Bath and Beyond I was thrilled when the salesman never even asked me for my price range.  Instead he asked me specific questions to get a better idea about what I was looking for and he showed me a better set than the one I was initially looking at.  I would gladly have paid more for that set because it met all of my needs.  I immediately bought 8 place settings and then a couple of weeks later ordered another set of 4 because I liked them so much.  It was such a thrilling and unfortunately rare experience to find what I needed at the first store I shopped at and have it be so effortless.  In case you are wondering, I purchased white plate sets (because I am not trendy and I want these to last for a long time), that have deep bowls (I didn’t want to have to buy a separate set of bowls for cereal and ice cream), and he hit the plates on the shelf and they didn’t break so clearly they are durable (because I have two young kids).  The bonus came when the salesman offered to ship them to me for free so I wouldn’t have to carry all of the boxes to my car.  Now that’s “Value Spending!”

Buying cheap items often costs you more in the long run.  Yet, many people are completely fixated on the cost of an item and want to buy the cheapest product. I am willing to pay more for a product that is going to last, won’t break easily, easier to maintain, etc.  I value my time and I’d rather not spend my spare time fixing, repairing, or replacing a product.  On the other hand, I’m also not Warren Buffet where I can afford any product at any price so I’m always looking to find a good value.  Are you a Value Spender too?

Your Financial Habits’ Impact on Your Kids

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As my children get older and can communicate better with me as well as, with each other I’m constantly amazed at how much they absorb from me and my husband, such as our mannerisms, the catch phrases we use, and even how they view money.  I’m not shy about telling my kids that something they want is too expensive.  Now, when my children see something they want to buy, they will ask me “Can I have it?” and “Is it too expensive?” If I say it’s too expensive they are generally good about accepting that answer. If they really want it, they will ask me if we can buy it when it goes on sale.  My kids are 4 and 6 years old, so even though they are mimicking how I behave and purchase items, it still makes me laugh since they are so young.  I’m amazed at how they are grasping the concept of the cost of an item or I should say more specifically toys.

So, when I recently read an article in Newsweek magazine, “College Credit,” by Angela Wu I was surprised to learn that half of college students have four or more credit cards, the average undergrad is carrying $3,000 of debt and that college credit card debt is on the rise.   The article stated that according to a 2009 Sallie Mae survey only 17% of college students pay off their balance regularly.   So to help protect college students, the 2009 credit-card reform bill will no longer allow anyone under the age of 21 to sign up for a credit card without a cosigner or proof of income.  They are hoping that this legislation will help students protect themselves from their spending habits.

While I feel it’s good legislation, I personally think that trying to teach college students about good money habits is a bit too late.  You need to start teaching your kids about money much earlier because it’s a process that they learn over time.  When they go to college, it shouldn’t be the first time they’re thinking about managing money and taking out debt.  Parents should engage their children in some of the financial decisions that they make for their household.  You don’t have to include them in on all of your financial decisions, but some smaller ones that can be used to establish good principles about money.  Additionally, there are many tools to support you in teaching your kids about money through toys, piggy banks, and even online games.  So before you cosign your child’s credit card and put your credit on the line, teach them a few good spending habits.

Energy Saving Tax Credits

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Just recently we discovered that our water heater was leaking so we called in someone who could look at.  After looking at it, he told us that it had to be replaced and that we should consider replacing it with a tankless water heater.  Using a tankless water heater for your hot water needs is better over the long run and you only use what you need.  The traditional water heaters keep your water hot even when you are not using hot water, thereby unnecessarily using energy.  We were also informed that if we want to go tankless we should do it this year since the tax credit for getting one expires at the end of the year.  With the tax credit, the cost difference between a traditional heater and the tankless one is not that much.

Then yesterday morning I was at a meeting and I met the founder of Afford Efficiency who’s goal is to make it easier for you to sift through the various programs that are available for finding more energy efficient products.  These can range from things like water heaters to kitchen appliances for both personal and commercial use.  The company is still in it’s early stages, but is looking to build a comprehensive database of all of the programs that are available.  You can also use the US Department of Energy site to find about various tax credits.

Many of us are aware of the tax incentives for items such as a hybrid car because there is much media coverage, but there are many other items such as the tankless heater (which I never even knew existed before having our leak).  So before you replace a piece of equipment or an appliance or do a remodel, research energy saving alternatives and the programs that you could qualify.  It could save you a lot of money over the long run and you also get to do your part in conserving energy.