Change may be the only constant, but along with change, higher costs often come along for the ride. Resisting change may allow you to save money.
As anyone who has ever purchased consumer electronics can tell you, the longer you wait, the less expensive the products become. The cost of the top of the line model may continually rise, but often nowhere near as fast as the features of the most basic model. Paying a few thousand dollars for the greatest computer available may seem like a smart idea, but knowing that the same one will sell for a few hundred dollars in a year or two may cause you to reconsider.
When we already have a solution to meet a current need, there's really no reason to change until it makes economic sense to do so. I have an older friend who still uses her film camera. She does so because it works just fine for her, she doesn't have to deal with ordering prints online, and she doesn't currently own a computer. So for her, switching to a more modern picture-taking method would cost a significant amount of money. She might reconsider her position if she had a computer, or if she needed to replace her current camera, but until that time she'll continue with the method that has worked for years. Add in the time she would have to invest to learn how to use a digital camera (versus her simple point-and-click) and you can imagine that it may be quite some time before she makes the transition.
At some point, the value of a new item will start to outweigh the cost. Increases in efficiency of newer technologies and rising costs of legacy methods may both factor in. But until you reach that point, you'll be better off continuing to do things as you've always done.
We may think that the process of getting married starts with a proposal, but it actually starts even sooner: picking out (and paying for) the engagement ring. As you will see, this is the first of many expenses that is an ideal candidate for financing via social lending sites.
Buying an engagement ring is likely the largest purchase a young man will have ever made. It certainly was for me. Few men can afford to pay cash for a ring, particularly if they follow the rule of thumb that you should spend about two months’ salary. Financing the purchase with a credit card – or worse yet with a store card from the jeweler – can make an already expensive purchase much larger. A P2P loan can offer a much better rate and most social lending sites allow you to borrow sufficient funds to cover the purchase. For example, a $25,000 loan represents at least two months’ salary for anyone making less than $150,000 per year.
Using a social lending site doesn't need to stop with your engagement ring. All other wedding-related expenses, from the dress to the flowers, the photographer to the reception and even the honeymoon are also popular reasons to turn to peer-to-peer lending. Browsing through loan listings on these sites, you'll see quite a few that are related to wedding expenses. The reason is quite simple: weddings are expensive. Paying for large expenses at the lowest available interest rate will make them as affordable as possible.
They say that arguments over money are one of the largest contributors to the high divorce rate in our country. So get your marriage off to the right financial start and use a P2P lending site to finance your wedding-related expenses.
In an effort to win over as many customers as possible, some companies offer services that seem to be at odds with one another. As a result, their marketing for each of their products seems somewhat less credible.
The Scotts Company provides an example of this type of conflicting service. For years, I've used their lawn fertilizers with much success. I've even been able to save money by pre-purchasing the full year’s worth of products, which are then applied throughout the growing season. Just as the advertisements claim, I am able to easily do it myself, avoid using a costly lawn service, and have one of the nicest looking lawns on the block.
Imagine my surprise as I've seen Scott's lawn service trucks in increasing numbers in my area. All of the advertisements I've heard from them talk about how expensive and unnecessary a lawn service is; yet still they offer one. Perhaps they realize that some people prefer convenience to cost, but it still makes their company seem less credible.
I don't know if the service is new or if I just happened to see more of their trucks, but they had better be careful with their marketing messages. Hopefully they'll come out with a joint commercial that says they have you covered regardless of which type of product or service you need. I could also imagine them advertising their lawn service by comically showing homeowners struggling to do the work themselves. Such a tactic would expose the danger of serving conflicting needs: to win over one type of customer, you would have to alienate another.
I suppose the lesson here is to take all advertising with a grain of salt and realize that an opposing view may be out there. The same company trying to convince you to buy their product may even present it.
Despite a pledge to stop recognizing authorized user accounts in determining FICO scores, Fair Isaac has since recanted and will continue to use them after all. While this is good news to many authorized users, it will also allow the fraudulent practice of piggybacking to continue.
The way authorized user accounts work is that someone with good credit can allow another individual to use his or her credit card. That person, known as an authorized user, gets the benefit of having the cardholder's payment history appear on his or her credit report. This can be particularly useful for college students and spouses without much credit history of their own.
We first described piggybacking in a post announcing improvements to Fair Isaac's method of determining credit score. The basic idea is that someone with bad credit, or limited credit, could pay to become an authorized user on the account of a stranger with good credit. They basically pay a fee, part of which goes to the account holder, to have their credit history amended to include good repayment information. Clearly, this is a fraudulent practice and artificially inflates a person's credit score.
Fair Isaac may have reversed its decision because there are many more people using authorized user accounts in accepted ways than those using them fraudulently. Helping out a spouse or adult child is a legitimate use of authorized user accounts. Lenders are also required to consider a spouse's credit history when determining credit risk. Without continuing to recognize authorized users, some lenders felt they would not be able to use Fair Isaac's scores. Seeing the bulk of their business disappear would certainly be reason for Fair Isaac to reconsider their decision.
While they have not given specific details of their updated scoring system, Fair Isaac did say that although authorized users continue to be used, other provisions make piggybacking and similar fraudulent credit score manipulation schemes more difficult to accomplish. I suppose that the majority of people, using authorized user accounts appropriately, shouldn't be penalized for those using them fraudulently, but in the end fraud will continue to cost us all.
The Associated Press recently reported that earning potential and its impact on paying off college debt were often not considered when choosing which school to attend. This, at the same time when one of the featured articles in Money magazine asked “Is a College Degree Still Worth It?”
It seems reasonable that other, more emotional factors such as school reputation, location, competitiveness, etc., would be part of the college selection process. But to totally ignore the cost as well as the ability to afford, or easily repay, attending a particular college seems unreasonable. We all strive to weigh the benefits of purchases versus the costs we incur in other areas, so why is college treated differently?
Perhaps is has to do with the psychological worth we place on schools that cost more. Many studies have shown that paying more does not necessarily lead to earning more or translate into a higher quality education. The Money article also noted how some universities were raising tuition and fees simply to raise the perception of quality at their institutions. At some level, we may actually feel better if we spend more on college.
College costs have been rising at much higher rates than other items of general concern. While energy costs have grown at a rate of 108% since 1985 and medical expenses at 251%, tuition has grown at an overwhelming 439%. It’s hard to imagine that the quality of such an education has grown at a similar pace.
A college degree is certainly something of value, but we need to ensure that we don’t equate high cost with high quality. In many cases, the abilities of the students will dictate their success far more than the college they attend. Getting bogged down with excessive college debt for a marginally better (or perhaps worse) education is not a financially savvy way to begin your adult life.
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