Step out of Your Routine and Save Big Bucks

Think about your daily routine. You wake up, you get ready, you get in your car, you fill up your gas tank, get to work, get lunch at a restaurant, go back to work, get a drink at Starbucks, drive home, watch cable for a few hours, and then go out to dinner with your family, right? Seems like a normal day for most of us. However, inside this day are lots of ways to save money, small amounts that can quickly add up to big rewards.

I'm sure you see what I'm saying - that you should get rid of your daily Starbucks coffee, pack lunch for work, etc. But what about an even bigger change? Imagine not driving at all! J.D. at GetRichSlowly just wrote an article about taking the bus for the first time, something that many of us would laugh at...but why not? Why is taking the bus so different? It's because we have become accustomed to the car, and to the lifestyle a car gives us.

I made a similar point in my recent post here on the Lending Club blog, entitled "Why Today Might Be A Good Day To Travel.” Making changes such as switching from a car to public transportation, or traveling cheaply, can seem extremely hard to do at first. However, small changes to your routine quickly create a new routine, and while it might seem ridiculous to get up and move to another country for a few months, once you have done it the act will feel natural. The same holds true with switching from driving to riding the bus---the act of doing it quickly becomes second nature.

What changes can you make to your routine? How can you save money?

By this time of year, many high school seniors have firmed up their college plans for next year. Whatever criteria they used to make their final decision, it’s clear that the economy likely played a large role.

With job losses and declining investment balances, many parents have had to advise more modest choices for their children. Even those with 529 College Savings Accounts, which should have been in highly conservative investments, so close to college, may have seen declines. Some improperly allocated 529 accounts saw major declines.

The College Hopes and Worries Survey, administered by The Princeton Review, summarized many of the concerns faced by students and parents. It found that:

• 67% of survey respondents said the economic downturn had affected their application decisions. Asked what the major way it affected them was: 38% said they were applying to colleges "with lower sticker prices," 34% said they were applying to "more 'financial aid safety' schools," and 28% said they were applying to "schools closer to home"
• 85% said financial aid will be "very" or "extremely" necessary (60% of which said "extremely")
• Respondents’ biggest worry about applying to college: "Will get into first-choice college, but won't have sufficient funds/financial aid to attend it"

An interesting point noted in my post, Top Value from Top Colleges, is that many “prestigious” colleges and universities rank high on value because they significantly offset the costs of attendance with grants and scholarships, which do not need to be repaid. I hope that students realized this and still applied to their dream schools, even if they also added some more affordable options to their list of prospective schools. Evaluating choices with as much information as possible will help you make the best decision. When choosing between schools that have accepted you, remember to consider the true cost of attendance. This will be an easier calculation now that the various financial aid packages (work-study, loans, scholarships, and grants) are known quantities.

All expenses are being monitored more closely during these difficult economic times. Larger expenses get the most attention and college certainly falls within this category. I hope that students are making good choices about which schools to attend and that they are considering the actual costs that will be incurred as opposed to the advertised prices.

Did you (or your child) change your college application plans based on the economy?

Up until recently, music fans were charged the same exact price for the teenage crooning of Hannah Montana as they were for the timeless compositions of Ludwig Von Beethoven. Travesty? Not exactly. Cruel joke? Only kinda. Economic opportunity? Bingo.

Where most see a chasm of fundamental musical elements, online mp3 retailers and music labels saw a chance to squeeze a few extra cents out of crazed consumers. iTunes announced recently that it would be introducing pricing tiers across its catalog of songs, and other retailers like Walmart and Amazon quickly followed suit. Meanwhile, music labels placed their hands together, twiddled their fingers, and sneered, "Excellent."

It appears that the different pricing levels will be driven by consumer demand, in much the same way that record stores use the practice of charging more for their best-selling items. In online music stores like Apple's iTunes, the more popular songs will see their price jump over $1.00 apiece to $1.29. The mediocre masses in the middle will most likely remain at their current prices, and the less known tunes will essentially hit the bargain bin with prices slashed, in some cases, under 70 cents per song. For example, there's a good chance that some day consumers will be paying $1.29 for Eminem's latest, $0.99 for a track from indie group She & Him, and $0.69 for Christian cover band Apologetix's "Should I pray or should I go now?" Apologetix fans, rejoice.

What remains to be seen is how consumers will react to the changes. iTunes, Walmart, and Amazon have to be cognizant of the torrent cottage industry that many people use to get their songs for the low, low price of free. The spawn of Napster still exists in a very real way, and raising mp3 prices too far might drive whatever demand there was for another Limp Bizkit album straight to Bit Torrent for the free version.

However, the decision to raise music prices was most likely not made with these file sharers in mind. Rather, it was made with blindly loyal consumers in mind.

Apple, Amazon, and Walmart have created a customer base that is loyal to mp3 purchasing. Whether motivated out of guilt, simplicity, easiness, or vicarious justice, these shoppers are in a habit of getting their tunes from the same place. And they aren't going to mind an extra dime here or an extra quarter there. Or so the sellers hope.

One place that surely doesn't mind the higher prices is the music industry, and in particular the Mr. Burns-y music labels. In an article that appeared on Information Week, Antone Gonsalves claims that labels have been clamoring for a different pricing structure for online music, but they have only recently gotten Apple on board. As the (far and away) market leader, Apple's iTunes was key to changing the culture of online music shopping, and now more players on board, the music landscape is sure to be much different.

La La Media, which sells tunes and also offers streaming music over the Web, called the change an "industry shift."

"You will see much more variable pricing by all music retailers, with the price moving higher on some tracks and lower on others," the company said in its blog.

Music labels are happy. Online music retailers are happy. But only time will tell what consumers think of this.

Savvy shoppers may have already made up their mind, as the increased prices might drive business to cheaper alternatives. Assume that someone is out to buy the new Britney Spears album. In the good old days of, well, a couple days ago, this person could jump onto Amazon or iTunes and grab a whole album for right around $10.00. Most of the time this would beat the store prices by a couple bucks, and it would be a much easier, hassle-free experience.

But with the higher music prices for popular artists, Brit-Brit's new album will not be so cheap online. Throw in the new online markup of around 30 percent for popular artists, and the tides have suddenly turned from online mp3s being the clear winner to big box retailers looking mighty fine. Chances are good that the higher prices of certain songs will drive savvy shoppers off of web pages and into stores.

Others who are used to buying songs for just under a dollar might be a little more gun shy when decision time rolls around. It's one thing to mindlessly add $0.99 tunes to an iPod, but when the price jumps over the $1.00 threshold, all bets are off. The psychology of 99-cent pricing is a tried and true business tactic. Messing with that might mean trouble.

"Most consumers are aware of `99' prices and why firms use them to make prices look cheaper," says Vicki Morwitz, a marketing professor at New York University's Stern School of Business and co-author of the research. "But because of the way the human brain reads, processes and codes numbers, we're still influenced by them."

There's no telling for sure how the common consumer will respond to an increase in digital pricing, but at least there is a silver lining for a certain portion of the public. Those who enjoy under-the-radar music couldn't have asked for better news. Instead of paying the 99-cent price along with everyone else browsing and buying on Top 40 lists, this eclectic bunch will be able to get their music on the cheap. At the very least, Apple's decision should drive more purchases from this group of buyers.

As for the rest of the music-loving public, the jury's still out. Online music retailers have a lot of things going against them, from greater competition to price-point psychology (and don't forget about the timing; it is a recession, after all). Only time will tell if the tiered system is one that consumers will figuratively and literally buy into.

Many of the ways homeowners can reduce their energy costs apply to businesses as well. Depending on the size of the company, the importance of smart energy practices increases significantly.

Consider the recent finding that US companies could save $2.8 Billion a year just by turning off unused PCs overnight. Workers may not feel as inclined to save their company money on electricity as they would within their own homes. In other cases, employers mandate that computers be left on so that patches and updates can be applied without hindering productivity. Perhaps a middle ground could be reached where computers were shut down most nights and over weekends, but were left on by request for specific actions to be taken.

Since overall energy use tends to scale with size, it’s also likely that energy waste does as well. The effect of a huge energy consumer reducing its use by 5% is clearly much more significant than the same reduction by a smaller consumer. Still, good habits from all users, both in corporations and homes, large and small, are worth the effort.

IBM has a great commercial in which an executive is dismissing an energy-saving proposal. He says that he’s no tree hugger and doesn’t eat granola for breakfast, so he questions why he should even consider such an idea. The light bulb (hopefully a CFL) goes on in the executive’s head when the subordinate translates the energy savings into the effect on the company’s bottom line.

Most businesses are profit-driven, meaning that they aren’t likely to take action unless it has profitable consequences. Fortunately, energy savings, with all of its many other benefits, has the ability to do just that.

Have you taken steps at work, whether as an employee or owner, to increase energy awareness?

If you watched the movie Fight Club, you’ll recall Tyler Durden (the main character) making his famous speech at the pub. He says “...you're not how much money you've got in the bank. You're not your job. You're not your problems....” Equating yourself as a person with how much money you have in the bank or how much money you make is one of the biggest “sub-problems” that people have with money.

This is a “sub-problem” because it usually lurks underneath the surface and cannot be directly identified. It has many different manifestations that show up as clues to this problem. Some recent tragic examples of this problem are the increase in suicide numbers as a result of the financial crisis. When the financial houses that these people built collapsed, some people thought that their entire lives collapsed and were no longer worth living.

The suicides are an extreme example of this problem; many other people suffer from this problem on a much smaller scale. A person losing a job and becoming severely depressed; holding onto a bad stock when it keeps on crashing; allowing the size of a bank account to dictate daily moods; inability to cut losses and put an end to financial bleeding are also examples of this phenomenon.

All of these problems, either big or small, come from combining your view of who you are with your financial situation. When faced with these types of circumstances, many times people end up making irrational decisions -- decisions that can end up costing them dearly. They view losing money as losing a part of themselves. So they have a hard time letting go and thinking critically about money, and have difficulty thinking about money independently of themselves.

One way to quickly tell if you have this problem, at any level, is to close your eyes and imagine a catastrophic experience. Do your emotions get stirred? Do you feel overwhelmed? Or is it just an intellectual exercise that starts you thinking how you will recover from this experience?
If you answered “intellectual exercise,” then you’re on the right path. If you answered with emotions and feelings, then read my next post in which I’ll discuss how to overcome this problem and separate how you view yourself from how you view your money.