Thursday, February 28, 2008

Beauty and the Frugalite: At-Home Haircuts

For years I have cut my husband's hair at home. We have a trimmer with all the attachments that we bought for about $20 and has served us well over time. My husband used to do the simple #1 buzz cut all over, but then switched to a two-length fade. It took a little adjustment, but I figured it out and can do it pretty well now.

Much more risky, however, is cutting my hair. His hair is so short that in a week or so any errors will be erased. My hair is a little more complicated. It's fairly straight, and I like to wear it between chin- and shoulder-length. It sounds simple, but cutting it is definitely more involved than buzzing his melon.

The last time I cut my hair was in May 2007. I try not to spend money on myself very much to keep within our budget and throw more at the debt, and regular haircuts have never been my specialty. Recently, my hair has been bothering me - it was too long and lifeless, and it took forever to blow dry. So I did something adventurous - I asked my husband to cut my hair for me.

He cut my hair once before, and it turned out pretty good. Or at least I thought it did until I went to a salon and they asked me if I had cut it myself. Oops, I didn't think it was that obvious. Regardless, I figured I'd give it another go. The budget has been tighter than normal and I was fed up with my hair. It was time to take a risk.

I won't pretend I wasn't nervous. What if it came out crooked? What if he cut off too much? What if he slipped and poked me in the eye with the scissors? But in the end, I trusted my husband to do a good job. We went for a simple cut, no angles or layers and soon the floor looked like this:

Yipes! That's a lot of hair! He cut off about 4 inches, and I am loving the new 'do. If you want to try this at home, I recommend:

  • Sharp hair scissors - no paper shears, they can fray you into split-endsville
  • Comb - all we had was a brush and my ears suffered for it
  • Towel to wrap around your shoulders
  • Trash bag to lay on the floor & catch the cuttings
  • Steady hand
  • Sharp eyes
  • Hand held mirror to check out the back
My coworkers think I'm crazy to let my husband near my hair with scissors. Have you or would you ever try this at home?

*Update* Shanti tried it at home the very same day as I did and posted about it too! Great frugal minds think alike!

Wednesday, February 27, 2008

Tales of a Cashier - Store Credit Cards

The Tales of a Cashier series relates my experiences at my part time job in a retail store.

At our store last weekend, our manager announced a new initiative: to push the store credit card. We are now supposed to ask every customer who comes through our line if they would like to put their purchase on their store card. If they showed any interest we should then spout off the benefits:
  • 20% off today's purchase
  • Gift certificate rewards
  • Special coupons & events
  • Special gifts.
Of course, nowhere in there do we mention any of the pitfalls of opening store cards, the biggest of which is the horrible interest rate: 21.99%! This is fairly common for retail stores. The fees and billing are pretty awful, too - you can't even pay your bill in store or online, and the expedited phone payments to avoid a late fee cost $15.

When I heard we were to start promoting this, I balked. I told the boss that I wasn't going to ask every one of our customers if they would like to go into debt, regardless of the "benefits" of the program. The only way I will even mention it to anybody is if they have a huge overflowing carriage and saving 20% on everything will make a BIG difference ($50+). Other than that, no way. I know that every person should be responsible for their own way, but I don't need to show them the door to debt. If they want it that badly, they can open the door.

SB at Be Thrifty Like Us discussed the many disadvantages of store credit cards recently as well. What do you think about store cards and "helpful" clerks who ask you if you want to open one? Leave a comment and let me know!

Tuesday, February 26, 2008

Stepping Up

Well the last couple of weeks have been crazy, to say the least. Most of the insanity has revolved around my job. Last week I spent a whirlwind two days in New Jersey for a sales conference. In addition to that, I have started taking on a larger workload.

Back in January, my boss asked me if I would like to be considered for a promotion, so like any normal person, I accepted. Once I was in the running, there was a lot to do. I had to complete online courses and tests, which were required to be done on a tight deadline and during non-working hours. This translated into coming home from work and spending 1-2 hours doing the online courses. The after-work time had formerly been referred to as "blogging time". :)

Fortunately, my efforts paid off and I will take on my new position starting our second quarter in May! It is still a sales position, so I will continue to be paid with a salary + commission structure, except the salary increases and the commission potential is better.

Since the only portion I can absolutely count on is the salary, I crunched the numbers to determine the difference this will make to our budget. My salary base will increase by $5000, which breaks down to $192.30 per paycheck (I get paid bi-weekly). After taxes, my take-home will be approximately $150 more per paycheck. Pretty sweet!

With the promotion, however, I plan to definitively quit my second job. Long time readers will know that I have wanted to quit for quite some time, but there's always a good reason to keep at it. Once I have the increased responsibility, I simply won't have time to do both jobs. So my drop-dead date on the second job is May 1. I am so excited! (Perhaps even more excited about that the the promotion itself!)

At the second job, I take home roughly $600 a month. So in actual hard paycheck figures, I will be taking a pay cut in taking this promotion. The plan, of course, is to make up the difference in commissions and I am confident I will be able to do so. Not to mention my quality of life will increase as well!

Monday, February 18, 2008

How We Got Into Debt

About a month ago, a commenter asked me how we managed to accumulate all this debt. It's not a surprising question, and I've been meaning to discuss it for a while now. I've been procrastinating for a few reasons, the biggest of which is that it's pretty embarrassing. I am ashamed of how we managed to go $38,000 in the red. There was no medical crisis, or house fire or tragedy that we borrowed money to cover. We just made a series of poor decisions. A series of very poor decisions.

We bought our first house in April of 2005. This in itself was not a mistake; however, we made too many assumptions when we purchased the house. We primarily considered the cost of the mortgage and not all the other costs associated with home ownership. Even with that, we would have been just fine.

In May 2005 we got engaged and began planning our wedding. We made a budget for the wedding based on how much money we could put towards it every month until the following summer, when we were to be wed. In June 2005, we bought a new car. Not new-to-us, brand spankin' new. With the car payment, we were still ahead and making more than we spent.

So what pushed us over the edge? In July 2005, I quit my job to work for a small business as their sales and marketing director. It was a commission based position. If I didn't make any sales, I didn't get paid. Unfortunately, I didn't have any sales experience, so I didn't make a lot of money. My income dropped by about 75%. All of a sudden, we didn't make enough money to pay our bills.

That alone wouldn't have been devastating - if we had made adjustments to allow for the lower income. But we continued living our old lifestyle, going out to eat, vacationing, buying needless things. We went away twice in less than a year - both trips piggybacked on business trips, but there were, of course, plenty of expenses incurred. We only sent the minimums to the credit cards and incurred a variety of late fees and over limit charges. The interest rates skyrocketed t 29.99%.

In October 2005, we attempted to minimize the damage by transferring some of the debt to a zero percent card. Within 2 months we were back up to the limit, as well as using the zero percent card. We had bills being automatically paid by the credit cards: cable, internet, gym fees, tolls. Every month was a decision of which bill would be paid late, as we never had enough to pay them all on time.

On top of our every day expenses was the wedding. While we stayed within our original budget, we by no means had any savings to draw upon. We didn't go all out, but there were plenty of places where we could have spent less money. We even took out an additional loan of $10,000 just for the wedding - which later blew up in our face.

When we returned from getting married, I found a new job almost instantly (I had been looking for a few months) and we turned a new leaf. Our rock bottom debt was in October 2006: $38,440. Since then we have paid off $26,000 and wiped out 8 separate debts (and added one). I cannot wait to erase the remaining 3 credit cards from our life!

Thursday, February 7, 2008

Looks Like Our Home Value Has Decreased

I received a letter in the mail the other day from the lender of our second mortgage. The second mortgage is technically an interest only HELOC. Arguably not the best method of buying a house, but that's an entirely different post.

Although I call it a house, where we live is technically a townhouse. That is, the building our house is in also holds two other townhouses. Fortunately, we have an end unit, so we only share one wall and have direct access to the garage, which adds to the value of our home. Unfortunately, townhouses and condos are usually the first to drop when the housing market takes a hit.

When we bought our house in 2005, we paid $280,000 (Remember, this is Massachusetts). It was appraised 2 weeks after we closed for $305,000. Sweet! Very exciting. Instant equity. Of course, what something is worth only counts if you're selling it.

The letter from our second mortgage stated that we couldn't further draw on our HELOC because our house's value had dropped so much. I don't know exactly how they calculate the houses' value or how much of the value they will lend up to, so it's difficult to say if our house's value has dropped so much that we are now upside down on our mortgage. It's possible, if it dropped enough. We didn't have any plans to draw further on the HELOC, or take any equity our of house at all, so that part doesn't affect us directly. What I am worried about is when we do want to sell our house.

I checked, and they list our house at $253,000 currently. Their estimates aren't perfectly accurate, but the letter from our mortgage company lends a bit of credibility as well. I want to close my eyes and shut it out, but it appears we now owe more on our house than it is worth. Or at least it's close.

When we bought our house, we intended to live here for 3-5 years. This summer will be 3 years, and we moving isn't even on the horizon right now, for a variety of reasons. We'll be staying put for the foreseeable future, and we may end up staying past what we had originally planned. There is still plenty of room here, even for when we eventually start adding people. I just liked having the option to move if we wanted to, and right now it would be pretty foolish to do so. Even more reason to pay down the debt - eventually we'll get to paying off the mortgage!

Monday, February 4, 2008

The Radio Will Pay Your Bills

Driving around the other day, I heard an ad on the radio for a contest. It went something like this:

Christmas is over, all the decorations have been put away, but there's still one "present" left to open.... your BILLS.

(psycho stabbing music)


Just send in your bill and we'll pay it for you! (Up to $500.)

The premise is simple enough - send in your bill, they call your name and if you call back within 30 minutes, they will pay your bill for you. Sounds great, right? Like a dream come true? Not really.

I think it's an awful idea. Sure, I'd love to have an extra $500 payment to the credit cards. Heck, I'd like to have an extra $100 to the credit cards. I just can't believe that we're live in such a world where this is what is going on.

I can picture it now: "Oh, I can buy shiny new things because the radio station will pay off my credit card!" I can picture it because I can see myself saying something similar a few short years back. And I know exactly what would happen if, at that time, I had won a $500 payment to my credit card. I would then go out and charge another $500 worth of stuff. Nothing important, nothing even significant. I would probably wonder why I was back up at my limit again.

Perhaps this is judgmental, but in my experience, the quick payoff doesn't solve the root problem. Just like after a fad diet, people tend to regain weight, after a quick payoff, people tend to regain debt. I don't think this would really help most people to achieve a better financial position. I am not even entirely convinced that if I were to win it now, I wouldn't "celebrate" by putting less to our debt, and instead would use the won money to treat myself. Maybe not all $500 of it, but at least a little bit.

Debt payoff is not only about throwing your dollars into the money pit that you have created. It is about the change in attitude that ultimately comes with the territory. I have been in debt, and back out of debt before. Until I can use credit wisely, I shouldn't be using it at all. Of course it is easier to buy things now and worry about paying for them later. But that's what got us into the mess in the first place.

I'm not impressed by this radio station's sad attempt to garner high ratings. I hope that some of the winners out there are really helped by the money.