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| Thursday, September 17, 2009 |
| The high cost of procrastination |
To cut down on impulse spending, it is often recommended that we postpone the purchase to let us decide whether we still want to buy that thing after a few days have passed. Lot of times, we find out that we don't really care much for that thing any more after a few days time. However, one area where postponement can cost a lot is when it times to start saving for retirement. The reason is that one of the main drivers in determining how much we end up accumulating by the time of our retirement is how long we let the money grow. Thanks to the magic of compound interest, the sooner we start saving, the more we can accumulate even if we start with a small amount.
To highlight the magic of compounding, consider the example of two friends: John and George who both turned 25 years on January 1, 2009. Assume both had zero net worth at that point. John decides to take action and starts contributing $2,000 on Dec 31, 2009 to his retirement account. John continues to contribute $2,000 every December for next 10 years until he reaches 35 years of age at which point he stops contributing any more funds into his account. So from age 25 to 35, he made a total of 10 contributions of $2,000 each, for a total of $20,000. Assuming, the retirement age is 70 years, and his account earned a 5% return annually, his original contributions of $20,000 will grow to approximately $138,760 at age 70.
George, however, believes in living a high life of spending rather than saving, and does not get around to saving until he reaches 50 years of age. At that point, he starts making $2,000 contribution to his retirement account every December for next 20 years until he reaches 70 years of age. So his total contributions were $2,000 * 20 = $40,000. Assuming he also earns 5% return annually, he will have approximately $66,132 at age 70.
So even though George contributes twice the amount ($40,000 versus $20,000 contributed by John), his retirement fund is worth only $66,132 compared to John's whose fund is worth $138,760 at age 70, or approximately 48% of John's amount.
In the above example, the rate of return used was 5%; the worth of the retirement account for both of them would have been more if the rate of return had been higher. Similarly, if John or George has started saving at earlier age, their worth would have been more.
The example may be simplistic and may not consider all the factors but it does show the magic of compounding. George contributed twice the amount of what John contributed, yet his retirement account is worth less than half of John's at age 70. And the reason for this vast difference is the amount of time for which we let the money grow or compound. Too often we all find reasons for why not to save, however, as the example shows even small amounts can grow to a significant amount if saved earlier in life.Labels: frugal, investing, saving tips |
posted by Little Rishi @ Thursday, September 17, 2009
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| Wednesday, June 17, 2009 |
| Where to buy boric acid? |
| As mentioned in my previous post, one of the things we tried to get rid of ants in our house was boric acid. However, when we decided to buy boric acid, we had no idea from where to buy it. Doing a search on the internet indicated that it's available at hardware stores. Unfortunately, when I tried Home Depot and other hardware stores in our area, they didn't stock it. Similarly, when I asked the associates at our local grocery store, they had no clue what boric acid was and what it was used for. Finally, one day, while in our local grocery store, I thought that since boric acid is a chemical, the pharmacist would probably know where to buy it from. My hunch proved right. The pharmacist told that it was a special item and they could get it within one day (no prescription required). She told me that it will cost about $7 for a small bottle. I went back to them a couple of days later and got a small bottle of boric acid for $12.97. The price seemed excessive given the small size of the bottle but since we wanted to get rid of ants, I bought it. A few days later, while visiting a dollar store, I found out that they also sell boric acid. The small bottle (5 oz) of Orthoboric acid at that dollar store was selling for $1.49. So if you need boric acid, it probably pays to check out dollar stores before buying it from a pharmacy or hardware stores as chances are that the dollar stores would sell it for the cheapest amount. Labels: frugal, frugality, save money, saving tips |
| posted by Little Rishi @ Wednesday, June 17, 2009
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| Wednesday, June 10, 2009 |
| Getting rid of ants in the house |
  For some reasons, this year, we have had more than usual number of ants in our house since Spring. At first, we decided to ignore them but lately, the problem grew worse, as the number of ants inside the kitchen area continued to grow. Finally, I decided to take action and went to our local grocery store and bought a spray can of ant killer for about $3.49. The spray can worked well and killed the ants on contact but it didn't do much to stop ants from returning. In addition, since we have two small kids at home, I didn't like using the chemicals in our house, and hate the smell of the chemicals.
Searching on the internet, I found that boric acid tends to kill ants. So we switched from our chemical spray can to boric acid, placing the acid on sheets of paper at couple of places in the kitchen and putting some sweetener in the middle of boric acid. The acidic powder did attract some ants but for most part, it was another failed effort on our part, as most ants continued to stay away from it. May be we hadn't applied the boric acid properly or may be the boric acid wasn't being very effective. We decided to give up on its use as we wanted to get a quick solution that would get rid of growing colony of ants.
Last week, we went to Home Depot and while we were discussing the issue with an associate, a customer in the aisle told us about Combat Ant Killer gel. She told us that she had used it before and found it very effective. We decided to go with her recommendation; the gel cost us about $4.97 plus tax for 27 grams (can also be bought from Amazon.com (Combat Ant Killing Gel 27grams) and other stores).
The Combat gel supposedly attracts ants but doesn't kill them right away. Instead, ants carry it back to their nest which helps the gel get to other ants and their eggs, effectively getting rid of the ant problem. According to instructions, it takes about 3-5 days to get rid of ants after applying the gel. We applied the gel at night time; the gel was easy to apply using the syringe type device in which it comes. We applied little amount of gel at different parts of our kitchen walls where we have seen ants. Within minutes of applying the gel, we saw ants go towards the gel. In the morning when we woke up, most of the ants seemed to have just vanished! There were a few living ants still visible but for most part, the steady line of ants that we had grown accustomed to over the last few days - that was gone! Hopefully, with a couple of more applications of Combat gel over the next few days, we would completely solve the problem of ants.
I thank that lady at Home Depot who told us about the Combat gel because we were just sick and tired of having so many ants in the house. Am sure there are lot of other options that are probably available for getting rid of ants in the house, but for us, Combat gel did the trick.
Related articles:
Wikihow.com: How to Get Rid of Ants
eHow.com: How to Get Rid of Ants NaturallyLabels: frugal, frugality, saving tips |
| posted by Little Rishi @ Wednesday, June 10, 2009
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| Tuesday, May 12, 2009 |
| Getting another bank fee waived |
 While talking to my father recently, I found out that he ended up paying $85 in "Statement Rehandling Fee" to Provident Bank. Reason? Apparently, the bank had been sending monthly statements to my father but they had been returning back to the bank as non-deliverable. For almost two years, they been deducting $5 per month from my father's account. Since my father doesn't use Provident Bank much, he didn't notice the fee until he went to the branch in April 2009. My father told me that he thought that he had informed Provident Bank about updating his address when he moved but apparently, the bank was still sending statements to the old address. To avoid further charges, he went to the bank and closed his account.
When my father told me about it, I went with him to the Provident Bank branch near our house. Fortunately, my wife also has a account at that bank and we have used that branch a few times to deposit/withdraw money. I met with the one of the representatives there and told him about the situation. He looked at the system and found that my father had indeed provided them with his updated address but for some reasons, the statements were still getting send to the old address. However, he mentioned that since the account is closed, the bank may not credit $85 back. In addition, he mentioned that in case of any amount discrepancy, we are supposed to notify the bank within 60 days. Before we could say anything, he himself said that since we were not getting the statements, it wasn't our fault that we didn't notify the bank within 60 days. He put in the request for opening the account, and crediting the $85 in fees. After about 2-3 weeks, my dad's account was opened but no amount was credited to our account. We went to the branch again and met that person. Fortunately, he remembered us. He took our info again and told us that he will talk to his branch manager. A couple of days later, we checked the account and lo and behold - $85 was there in the account! Lesson learnt: It pays to talk to the bank to see if the charges can be waived. As mentioned in one of my previous posts, if the fee was due to an infrequent mistake, chances are they will waive the fee. Labels: bank, bank bonuses, Bank fees, frugal, saving tips, savings |
| posted by Little Rishi @ Tuesday, May 12, 2009
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| Wednesday, May 6, 2009 |
| Getting discount on air travel |
Pentagon Federal Credit Union is paying 5% cash back on your first $4000 of airfare purchases per month to its Visa Platinum Rewards card holder. The offer came at the right time for us as we are planning to take a trip to visit our family over the summer. The offer is valid for purchases made by July 31, 2009.*** Airfare purchases must be made between May 1, 2009 and July 31, 2009 to qualify for 5% cash back promotion, thereafter such purchases receive 1.25% cash back. Earn up to $200 cash back per month on airfare purchases. Fuel purchases for airplanes and boats receive 1.25% cash back. I have had the card for quite some time and am pleased with it, since it gives 5% cash back on gas purchases, 2% cash back on supermarket purchases, and 1.25% on all other purchases, while carrying no annual fee. After getting the Schwab Visa card, which gives 2% on all transactions, we've limited the use of Penfed's Visa card to primarily for gas-related purchases but I like the fact that Penfed automatically credits the cash back each month, reducing the outstanding balance.
For more info on Penfed's credit card, see:
Penfed Visa Platinum Rewards cardLabels: credit card, frugal, saving tips, savings |
| posted by Little Rishi @ Wednesday, May 06, 2009
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| Tuesday, May 5, 2009 |
| How to get bank fees waived? |
Recently, I had initiated a bank-to-bank ACH transfer from my Digital Federal Credit Union (DCU) to Presidential Bank account. The money was supposed to be withdrawn from my checking account at DCU. However, while initiating the transfer online from Presidential Bank's Web site, I mistakingly selected Savings account at DCU. Result? When Presidential Bank tried to withdraw the money, it did it from Savings account at DCU where I didn't have sufficient funds. As a result, the transaction got rejected and DCU charged me a $30 non-sufficient fee (NSF).
To make matters worse, Presidential Bank automatically tried to go through the transaction again the next day, and again, the transaction got rejected due to insufficent funds. I learnt the hard way that if a ACH-transfer transaction is rejected for the first time, the bank automatically processes that transaction again the next day. However, the result in my case was that DCU hit me with another $30 fee since I still didn't have sufficient funds in that account. So the net result of these two transactions was that I got hit with $60 fee by DCU. Fortunately, Presidential Bank didn't charge any fee for rejected transfer but it did suspend my DCU-Savings account for future transfers. I removed the suspended account from list of approved bank accounts for transfer and hopefully, will be able to add it back at a latter date.
I called a DCU rep and told her about my error. Initially, she mentioned that DCU only refunds such fees in case of error on DCU's part. I told her that it wasn't DCU's fault, and it was I who had entered the account info incorrectly. I politely asked her again if she could waive it. Fortunately, she told me to hold on while she talks to her manager. In a few minutes, she came back and told me that based on my history with the credit union, they have decided to waive both $30 charges but it's only for this time only. I thanked her for waiving the fee.
Lessons learnt were:
1. Be careful before initiating bank-to-bank ACH transfers to ensure all information is correct, and there are sufficient funds in the account.
2. In case a bank has imposed a fee, it always pays to call them and see if they can waive the fee. The thing I have learnt over the years is that you need to be polite rather than demanding when speaking with customer service reps. These reps already have had enough of disgruntled and angry customers, and they appreciate if someone talks to them politely.
Banks aren't required to waive such fees because that's part of the way they make money, and especially so since it was mistake on customer's part. However, in most cases, if you have had a good history with a bank, and hadn't had such issues regularly, banks will waive the fee. But you need to careful not to have NSF or other such transactions frequently.
3. Visit the bank's branch and talk to a service rep. In many cases, service reps at the branch will be willingly to waive the charges. If a branch is not located nearby, then it's better to call and speak to a rep; avoid emailing unless that's the only available option. With emails, it gets much easier for banks to send a standard reply, explaining why the fee can't be waived. However, it's still worth a try, if it's not possible to visit a branch or contact the bank via phone.
In my case, since DCU branches are not located in my state, I had to call them. The entire conversation with the DCU rep took less than 10 minutes but it was nice to have $60 credited back to my account.Labels: bank, Bank fees, frugal, personal finance, saving tips, savings |
| posted by Little Rishi @ Tuesday, May 05, 2009
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| Wednesday, October 24, 2007 |
| Little Rishi says: Credit cards - a boon or a curse? |
Little Rishi says:
Disciplined people use credit cards to increase their wealth by making regular purchases, interest free, on their credit cards; paying off their bills in full in a timely manner; and earning rewards on their purchases, without paying any kind of credit-card related fees.
Undisciplined people use credit cards to get further into debt by increasing their discretionary spending, and by avoiding to make full payments in timely manner, while incurring various credit-card related fees.Labels: bank, credit card, frugal, saving tips |
| posted by Little Rishi @ Wednesday, October 24, 2007
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| Favorite Quote |
"Work is worship".
- Author Unknown
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