Economic stimulus is coming. And many retailers are looking for you to spend your check. In the recession, it’s a good time to spend money if you have it.

Of course, the amount of my rebate check is $0. I’m not getting any. But it’s not like I’m making a lot more. The tax rebate calculation and tax system was unfair to places with a very high living cost structure. Even though you are supposed to have a “high” income on a national basis, your high income simply doesn’t go far enough after all the needed expenses.

So what’s my advice on your rebate check? You guess it. You should SAVE it. The current economic slowdown is not going away yet. You will have plenty of chances to spend it on good purposes later.

But if you have to spend, make sure you spend it wisely. Find good deals. Pay down your credit card debts. Pay down your college loans. Build your emergency savings. These are just basics. I hate to repeat what Suze Orman would say, because what she says is obviously boring. But the truth is often boring, and not pleasing to your ears or heart. There is never a get-rich-quick scheme (or if there is, it won’t last very long at all). To accumulate more net worth, you simply have to save/earn more and spend less. I know every reader here would like to earn more instead of to save more. But saving more is actually a whole lot easier than earning more.

Anyway, if you still don’t know how much you may be getting, here is a calculator from IRS for you to figure it out. Hopefully, it’s something non-zero for you.

While doing this new budget, I was extremely impressed by the tools provided by the credit card companies. They have made the budgeting process so much easier that you no longer need to spend hours and hours trying to figure out where your money has gone. All of them provide spending by categories and dates, so that you can easily figure out your own spending style. Although the tools will never be perfect in categorizing every bill, at least it’s a very good start.

Here are some reflections on the increase of my expenses from 2 years ago:
My gasoline cost increased from $160 to $260, mostly to due crude oil price increase and longer commute distance.

The other major increase in the total of food+dining is from dining out, even though the most (if not all) of the dining bill is less than $35 per family. This category has gone up by almost 50%. The main reason is that my kid is no longer 0 to 1.5 year old, and I can finally dine out.

My cell phone usage has gone up too from $7 monthly to about $9, due to the increase in my other side activities besides the blog. But the absolute amount is tiny in comparison to any other items. And yes, I’m still using T-mobile prepaid.

And I have also decided to simply budget for my charity spending, instead of deluding myself. It has been pretty consistent for past 5 years, and the amount of money going towards charity purpose will only go up instead of down. I have under-budgeted the charity amount somewhat, just to give myself a little financial breathing room. I think putting it at $290 monthly should be a good compromise.

My “vacation” expenses have gone up a lot because of the cost increase in international travels going back home, and also now I’m forced to take these travels ONLY during school recess.

In case you wonder, I also zero out Spousal IRA item since that is simply a “theoretical” contribution instead of a real one. My tax brackets have disallowed this contribution almost every year.

I also up $200 on miscellaneous category, which appears to be the right amount from my past 12 months of spending.

Looking forward, I expect that I will be spending more and more on children on educational purposes as they grow up.

From above, my total expenses (in white) are $5238, and my total taxes (in red) are $1661, and the savings (in green) are $2792. Assuming a household income of about $110K, or a monthly wage of $9167, my cashflow after deducting all the above items is negative $524, which needs to be deducted from savings. Please note that the above taxes are just the taxes that one might be paying at such income level, but I actually pay A LOT more (3X or more). This is mainly due to a very progressive tax system that extract a lot more taxes from any additional income beyond this level. My marginal bracket is at about 40%, instead of 20% from the above. The only problem is that it just doesn’t take much more income to quickly go to 40% marginal bracket.

The bottomline is that my net saving has dropped to $30400 from the previous $45000, after I account for the 15% discount in share purchases of my company ESPP plan. Some of the drop is due to the differences in what I’m accounting for budget, but nevertheless, the drop is significant enough to be observable from bank account balances. Unfortunately, I expect my saving levels to continue to dwindle, due to the increase in the child expenses going forward.

What’s the lesson here? I’m not becoming much less frugal, but my saving drops. Inflation accounts partially for the drop, but the main reason is as stages in life progress, your saving (if it is still positive) will be dropping to its LOWEST when your children start going to college. I’ve written an entire post (boring, but truth that you don’t want to hear) on this point to advise anyone out there to start SAVING NOW. The best time to accumulate your savings is before having any kids, especially before getting married (and after you just started working). The next best time to accumulate your savings is when your kids finish college, and before you retire. The rest of the time, one should consider oneself lucky to scrap away something left after all expenses are paid. If you have any doubts about my drawn conclusion, simply ask your parents.

The gasoline cost has been going up along with the crude oil prices. $4 seems to start to change the consumer’s behaviors from my personal observation.

From my own budget made back in 2006, more than 2 years ago, I was only spending $160 a month for gasoline. Now, for the last 4 months, on the average, I’m spending about $260 a month for gasoline. That is 62.5% increase. Certainly, part of the increase is due to some lifestyle changes including longer commute distance and I’m taking kids out more often to farther places. But majority of the increases probably come from the increase in the crude oil prices.

The prices to fill up the pump definitely are more shocking every time. However, I consider myself fortunate enough not to be affected much by the energy costs. After all, it’s $100 monthly increase, or $1200 annual increase. It’s some money, but much better than the horror stories on TV where the increase is $200 to $300 a month. Americans tend to travel and commute quite a lot. And spending time on the road is pretty much meaningless, aside the thrill from the speed.

Besides my gasoline, most of the items in my 2006 budget don’t apply anymore. My water bill has gone up by $1.5 to $26.50, and my combined bill for gas and electricity has gone up from $100 to $120. These are not a lot of increases, but they are increases nevertheless.

Next time, I’m going to re-do my budget and take a look at food from grocery bills and dining outs. There have been definitely quite a lot of increases, due to inflation and kids growing up. I’m fairly certain that the monthly increase in food is more than $100.

I guess the only upside from all the increases is my base salary increase. Unfortunately for many families out there, the increase in income barely covers the inflation cost.

Watching how Teri shops is just amazing. I thought it’s hard to find someone like my wife who really can get grocery deals thru usage of coupons. But Teri is a couple of steps beyond.

I saw the TV program for TheGroceryGame.Com. She walked out of the grocery store, paying only about $80 for some $280 worth of grocery. The numbers are amazing. But the image of her walking away with an entire shopping cart FULL, but paying only $80, is just awesome. I’m sure that you and I know how much grocery you can buy with just $80 these days. Maybe half of the shopping cart of grocery at best.

She keeps tracks of on-sale items and also her coupons. I just can’t imagine that someone would go into so many details for grocery shopping. But hey, her results are just unbeatable.

My only regret is that you need to sign up & pay at her website for specific grocery information. While I have not personally tried it, I suspect that you probably will net a positive sum by using her service.

Can you buy boxes of cereals for $1 or less in the recent month? If you can, I suppose you’re on the right track. They have been on-sale, plus that if you have the corresponding manufacturer’s or store coupon, you can get them at $1 or less. My wife just stocked up many boxes.

I guess grocery shopping can really be a game that you can win. It’s even more important with the food cost going up these days.

If you have any experiences with Teri’s website/service, please do let me know by leaving some comments. Thanks.

Frugal at 1stMillionAt33.com

P.S. I’m not affliated with TheGroceryGame.Com in any ways. I will never write paid articles. All articles are my personal opinions.

There are an increase in bankruptcy filing by corporations. It’s very important for every consumer to protect themselves in every possible way. The most important thing is don’t pay cash. Cash given to corporations is only good as long as the corporation exists.

If you buy gift cards, be sure to use them as quickly as possible. Gift cards are like loans given to the companies. The only commitment from the companies is that they will honor their gift cards before they go bankrupt. An example is the recent Sharper Image bankruptcy. They stopped honoring the gift cards.

If you pay by cash/check, it’s the same story. Aloha airline going bankrupt will not be honoring their sold tickets if they were paid by cash or check.

I know it sounds outrageous. But that’s just the way it works. Once a corporation files bankruptcy, the shareholders or the owners no longer have the control over the company. Rather, the corporation is “owned” by the bondholders, who will need to divide up the remaining assets in the bankruptcy court. If you have any cash left in the company’s control, you are just another lien holder.

To avoid these heartache, the only way is to pay by credit card. A payment by credit card is only a commitment to pay the amount of cash through credit card company. Since credit card companies don’t give these money to the companies immediately, but only extend credits to the company, there is no money exchanged (yet). Therefore, it’s a much safer way to pay. And that is the reason that credit card company has the bargaining power to allow you to dispute your payment when the service/products are not received.

With global liquidity drying, I expect that both big and small companies are going to go through a rough time for quite a while (years, I mean). Those that don’t have enough cash on hand for daily operation will need to file bankruptcy. And you don’t want to become a victim of such happening.

Best luck shopping.

Frugal at Posted in Frugal Ways, Credit Cards | 3 Comments »