In Ramit Sethi’s book, “I Will Teach You To Be Rich,” he compares frugal people to cheap people. He has a post on his site showing some of the differences. Some of the comparisons include:

Cheap people try to get the lowest price on everything.

Frugal people try to get the lowest price on most things, but spend a lot on items they really care about.

The one that applies here is:

Cheap people are unreasonable and cannot understand why they can’t get something for free. Sometimes this is an act, but sometimes it’s not.

Frugal people will try as hard as cheap people to get a deal, but they understand that it’s a dance and, in the end, they don’t intrinsically deserve a special deal.

About 3 months ago I purchased a pair of pants from Gap. They looked good in the store, but after wearing them a few times, they just weren’t for me. I knew that it was too late to return them, so I went into the store to ask what they could do to help me. I explained my situation, but unfortunately the sales clerk said that they don’t accept returns past 30 days. I asked for store credit. No. I asked to just choose a different size of the same style. Nope.

So, I asked for the manager. I’ve been getting more and more experience negotiating, and at this point, I have a pretty good idea of what it takes to get what you want. Unfortunately, the manager wasn’t willing to help me, either. I didn’t yell at him, I didn’t argue for an hour, and I’m certainly not bashing the store now. They have policies and I’m no exception. So now I’m left with a pair of pants that don’t fit perfectly.

The point is that just because we don’t like the way something is, doesn’t mean we have a right to change it. Sure, it would have been nice to get a new pair of pants, but I completely understand why I was denied. Had I come in a week or two earlier, things might have been different.

When negotiating, take a step back and think about what you’re negotiating for and whether you have a better argument that the other guy. “Because I don’t like paying full price” works sometimes, but other times it’s best to move on and learn from your experience. The lesson I learned is to read the return policy carefully.

Credit card fraud can easily be avoided with a bit of common sense and by being knowledgeable about the potential dangers in general. Unfortunately statistics have shown and continue to show us that fraud is on the up.

Consumers have to face the realities of becoming a victim of fraud because we can’t live without the plastic fantastic anymore. Every time we pull our credit card from the wallet we expose ourselves to potential attacks. The good news is that not all is bad. You can protect yourself with the following steps.

Being a victim of credit card fraud is not fun. Short of having a nervous breakdown because of the fear of losing all of your hard-earned money you need to keep a cool head to be able to stop the perpetrators sooner than later.

The following 10 step action plan will allow you to protect yourself against the commonly seen fraud attacks.

1. Protect your personal details

Your personal details are like a fingerprint. Keep them save at all times. Avoid sharing passwords, PINs  or birthdays with other people. One common problem are social networking website where people freely share their birthdays with strangers.

You should also avoid using birthday dates as your PIN access details because those are the first to be guessed by thieves.

2. Take advantage of protection schemes

Verified by Visa and MasterCard SecureCode are schemes offered to consumers by these card merchants. Both schemes are free to use and can be joined once you get a Visa or MasterCard credit card.

3. Shred all your old statements

Never ever throw your old payment information into the rubbish bin without having shredded the info first. Anything personal containing dates, financial information, your address, your name, etc should be disposed of securely by shredding first.

Financial thieves lurk around household bins and are not shy of raiding your rubbish bin in search of private data that can be used to steal your identity or your money. Oh, and if you’re buying your first shredder – consider purchasing one with your credit card if you have a card that offers extended warranties or purchase protection!

4. Turn your PC or Mac into a fort

Always keep your anti virus software up-to-date. Consider using a firewall at all times and never browse the Internet unless you have these two lines of defense in place.

You also need malware software to help keep you safe from any attack while surfing the Internet.

5. Become wary of telemarketing scams

Don’t be tempted to hand out any information to people over the phone unless you call them first. Your bank will not ask for passwords or login details by phone out of the blue. 

6. Email security against phishing

One of the most popular forms of fraud is to steal your personal details via phishing. By using a phishing filter you can counteract any threat. In addition to this, it helps to be alert whenever you receive email. Never click on a link within an email program – always copy/paste and open a new browser window.

If the email is from your bank or PayPal asking you to verify your information before they shut down your account, don’t bite. These are common traps to make people click on the links after which their information is re-routed to another website (a phishing website) where your information (password, logins) will be stolen.

7. Shops can cheat too!

If you use your credit card in shops make sure you cover the keypad with your hand while you type your PIN. If you are in a foreign country identify that the actual terminal is issued by an official merchant by checking the terminal issuer number at the back.

There have been several recent cases of fake terminals used overseas to empty travellers bank accounts. By the time they got home, the money was gone.

8. Be alert

Check your monthly credit card statements and screen them for any suspicious transactions. If in doubt, contact your bank right away and double-check the transaction in doubt.

Thieves often start by stealing small amounts of money from your card. Once they realise you haven’t caught them they will strike.

9. Consider identity theft cover

Because of the rising cases of phishing, identity theft and fraud insurance companies have started to offer identity theft cover options.

If you want to eliminate every possible risk then taking out cover like this could be something you should look into.

10. If you lost your wallet…

You must contact your bank immediately. You can find emergency contact numbers on the back of your monthly credit card statement or online. Even better, keep a record handy on the fridge and in your wallet.

Cancel your card immediately. Unless the bank can proof neglect on your behalf your money is usually safe.

Contact your local bank for more information about credit card fraud protection.

This article was written by Jeremy Cabral who is part of the team at CreditCardFinder.com.au, an Australian credit card comparison service. Read their Credit Card Fraud, Traps and Scams guide for more credit card safety and security tips.

Please head over to Free Money Finance and vote for me in the current games of the March Money Madness contest. My post is “How to Save Money on Wireless Carriers”. Thanks!

Every morning, from as far back as I can remember until I left for college, my parents would have a cup of coffee in the morning. Occasionally they would have a cup in the evening as well, and I can only imagine how many cups they drank at work (My mother is a fourth-grade teacher, my father occasionally deals with insane criminals).

I hate the smell of coffee. I’ve never had a cup in my life. Out of the four sips I’ve ever taken, I’ve wanted to vomit after each one. I don’t support Starbucks. In fact, I boycott Starbucks as much as possible. It’s not hard considering that I don’t drink coffee, but it gave me a great excuse when my mother asked me to go out and get her a cup.

Dropping the Habit

I tried everything to get my parents to get rid of the awful stench at home. I told them it would ruin their teeth, I told them it was a gateway to opium, and I told them they wouldn’t be able to retire because of it.

Clearly none of my efforts worked, but recently my mother started drinking instant coffee exclusively and it made me think about that third excuse I gave them: how much drinking coffee really cost them.

Calculating it Out

My conservative estimate was two cups of coffee a day. Every single day. For 20 years. I’m sure they drank more than two cups sometimes, and I know they did it for more than 20 years. But we have to start somewhere, and I don’t want to be the guy who completely blows things out of proportion to try and prove a point. This is not a scientific study. Actually, I haven’t done the calculations yet, but here we go:

A few more assumptions:

• Each week consisted of 11 home-brewed cups and 3 cups at Starbucks (or Dunkin Donuts, or wherever).
• The average cost of a pound of coffee is $10 and provides 32 cups of coffee.
• The average cost of a cup of coffee is $2. My parents would laugh at people who got the “tall.”

So the average week was 22 cups of home-brewed coffee and 6 cups of store-bought coffee. That comes out to $6.87 for home brewed per week and $12 for store bought, for a total of $18.87.

My first thoughts are WOW, that’s a lot of money for 6 cups of coffee. The home-brewed stuff was a bargain!

Their coffee habit was costing them about over $75 a month, or about $985 per year, or $19,683 over 20 years. Damn.

But how much would it have been for the instant stuff? It costs about $7 for a can, which makes 21 cups. So $0.33 per cup. Slightly more than home brewed. Still, it comes out to $486 per year, or $9,733 over 20 years.

After all of this, it looks like $486 per year for coffee is rather insignificant. If you do anything for 20 years, the costs are going to look high, but I honestly expected the costs to be higher.

Early Retirement? Not Quite

My conclusion is that my parents’ drinking habit didn’t cost them an early retirement. My focus should have been on them brewing their own coffee instead of buying it 3 times a week, but the trade-off of having that stench in the house more often may have been too much for me.

The main takeaway is that people are getting ripped off every morning when they drink coffee. There is barely any difference between home-brewed and instant coffee (home-brewed is actually cheaper!), but there’s a HUGE difference between home-brewed and store-bought!

Brew it yourself! Why pay $2 per cup when you could pay $0.33? Is the convenience worth the 500% markup?

I have been giving updates on my budgeting each month, but as my spending becomes more regular and I have less fluctuation to report, it becomes less interesting, so I am going to change the focus to my net worth, which is a long term goal as I reach for decreasing my debt, increasing my savings, and reaching 0.

January was a great month for both my net worth and for the blog. Let’s start with my financial progress. My bank accounts got a nice boost because I received the second half of my signing bonus at work and completed my orientation period. That comes with a small salary increase which I’ll see in future paychecks. It’s always nice to get a raise and receive recognition for doing a good job.

Net Worth

I was able to increase my net worth by $1,510, up to -$15,975. This includes fully funding my emergency fund, starting my IRA, and paying down student loans. This brings my student loan debt down to $22,587, with the average interest rate being a low 2.79%. Since I’m paying just the minimums due to the low interest rates, this won’t be decreasing quickly, but my other accounts will definitely show sizeable increases moving forward.

Blog Traffic

In terms of the blog, traffic increased 158% over December numbers. The great increase in visitors was likely due to several guest posts, which explains the increase in subscribers as well as return visitors. While these increases are beyond what I would ever have expected, I don’t think the trend will continue. However, I would like to continue growing at a 20% rate, which is definitely possible if I continue to guest post and get my name out there.

Samurai Alexa Ranking Challenge

Personally, I have been doing very well in the Samurai Alexa Ranking Challenge. When we started 12 days ago, I was at 682,918, which was my average ranking over the previous 3 months. Obviously, as I grow, my ranking increases, so even then, my 1 month ranking was just 371,965. Currently, my 1 month rank is 213,551, and my 3-month rank is 441,611. As long as I keep my 1-month number below my 3-month rank, I will continue to build toward my goal of breaching the 200,000 mark.

Favorites

Here are my favorite articles from January, as well as my list of guest posts that went up, in order of referral traffic generated from each post.

Mailbag: 5 Steps to Get Out of Debt

How to Avoid Paying $900/Month For Your iPhone

How to Use a Windfall

Impressing Your Friends Can Cost You

Maybe Phone Insurance Would Have Been Worth It  (Lauren’s Guest Post)

Guest Posts

Money Relationship – Why I Don’t Stress About My $23,000 Pile of Debt (Jan 14)

Budgets Are Sexy – Who Cares If You Saved Money By Spending Money? (Jan 14)

PT Money – Simple Negotiation Boosts Your Mood and Your Wallet (Jan 13)

You Have More Than You Think – The Pinnacle of Frugality (Jan 13)

PT Money – How I Saved $27.95 on My Taxes (Jan 29)

I spoke to my grandmother last week (she reads the blog on her snazzy new computer she just got) and she told me the advice her boss gave to her many years ago.

He said that before you pay the bills and before you go spending your paycheck, pay yourself first. Put 10% aside and then go pay the rent, utilities, etc.

I’ve heard this advice a million times on various blogs, but as much as people come up with creative ways to save a few bucks on taxes or search the weekly circular to save a few cents on pasta, nothing can replace the best way of saving and making sure we have enough money in the future.

Sure, you may make more in the future as you get a better job and more opportunities open up, but saving now can have a lasting impact. There is always enough to put a little something away. Even if you think that money won’t make much of a difference, it definitely will.

I’ve seen this graph several times, but for those who haven’t seen it, look at how much of a different putting money aside now is compared to waiting.

Taking a look at the numbers, it’s astounding how much of a difference paying yourself first makes. Consider this example:

Alex is 25 and saves $5,000 a year for 10 years, and after 10 years, has a cool $73,000 in his bank account from his $50,000 in contributions. Then he doesn’t contribute another cent until retirement.

John is 25 but decides that he’ll be able to make up the difference later. he waits 10 years, then contributes $5,000 a year for the next 30 years, for a total of $150,000 in contributions.

Who do you think has more money at age 65?

Despite contributing 3 times as much as Alex, John has about $55,000 less at retirement, assuming a 7% return on investment.

And what happens when Alex doesn’t stop saving at age 35, but keeps investing $5,000 a year for 30 more years? He ends up having over twice as much as John. Can you believe that those ten years delaying cost John over $600,000?

There really is no replacement for saving. As you get older and make more money, you will also have more responsibilities and saving will be just as hard. So do yourself a favor: start saving TODAY by making your “pay yourself first” bill more important than than the rest, and you’ll be doing yourself a half a million dollar favor.

Today marks the one week anniversary of the Samurai Alexa Rankings Challenge.

For those who aren’t familiar, Financial Samurai wrote a post last week encouraging bloggers to improve their Alexa ranking, propelling them to reach the top 200,000 ranked websites in the world. He called this group the Yakezie (pronounced yah-kay-zee).

He laid out several ways of doing this, including installing the Alexa toolbar, but the most important thing to come out of the post, in my opinion, was that we would create a small community of bloggers to encourage, help, and motivate each other to continue growing and moving up the list of top websites.

The Samurai Alexi Ranking Challenge Page

Today, I am publishing the Samurai Alexa Ranking Challenge page on the site that will track the progress of the Yakezie group each week. My hope is that the constant reminder will add motivation and help retain the intensity that we all have now.

The page shows the Alexa rank of all participants at the beginning of the challenge, last week, and this week. Also, we see our current rank within the group as well as last week’s rank. Finally, the site with the largest week over week gain will be highlighted.

Congratulations to Engineer Your Finances for this week’s top mover!

Come over to the Samurai Alexa Ranking Challenge page to keep track of everyone’s movement and for some weekly encouragement. But here’s a peek at what to expect. Come back next week to see how we’re doing!

This is a guest post by Bucksome, a baby boomer trying to make the most of her money while saving for retirement. Read more about her at Buck$ome Boomer’s Journey to Retirement. Subscribe to her RSS feed to follow new posts.

The common goal all people have when managing money is financial success. But what does that mean?

The dictionary definition of success is “the favorable or prosperous termination of attempts or endeavors“. Adding the adjective “financial” would mean positive results pertaining to money matters. There are many ways to measure monetary outcomes.

Debt Reduction

When I made the final car payment recently (six months early) it was a great feeling. Not as good as those who get to call up Dave Ramsey on debt-free Fridays but nice nonetheless. Reducing the debt load or eliminating a payment can be success to those with outstanding obligations.

I have short term and long term goals related to debt ranging from paying off consumer debt to burning the mortgage.

Savings

A second way to measure financial progress is savings. There are all kinds of vehicles people use to save ranging from emergency funds to retirement plans. You’ll see many personal websites with various savings tickers.

If you are out a debt, the next financial goal should be a fully-funded emergency fund. Daniel’s written about his goal to fund a $5,000 emergency fund. Saving for retirement will most likely be continual during working years.

Net Worth

If you have no debts and have met savings goals then net worth is the another way to measure financial progress. You’ll see blogs that regularly update the author’s net worth figure. The problem with this method is that it can be volatile.

Just ask anyone who owned real estate in Michigan, Nevada or California the past few years or invested heavily in the stock market. We saw a plummet in net worth which is still recovering.

Financial Success

Meeting your monetary goals however measured is what counts. For us, financial success will be a comfortable retirement with no debt and more than enough savings. I hope to see you there too!

I decided several months ago that I wanted to start investing, so I signed up with Schwab and started contributing automatically each month. It made sense, and I wanted to do SOMETHING, even if it wasn’t perfect.

Well, now I realize that it wasn’t perfect and I want to tweak my plan. I currently contribute to a Roth 401(k) through work but until Sunday, I hadn’t created a Roth IRA.

So my brilliant idea is to use the Roth IRA as an investing account! I can withdraw my contributions at any time (but not the earnings!) and if I want to withdraw the earnings, I’ll be able to take money from other places (reduce my 401(k) contributions for a few paychecks, dip into one of my sub-savings accounts) to make up for the interest I won’t withdraw from the Roth IRA. Essentially, I would keep my investing in a Roth IRA, earn tax free interest there, and withdraw that interest by making smaller 401(k) contributions equivalent to the amount of interest I earned but didn’t withdraw.

I think this is definitely the way to go. Why invest and pay taxes when I can invest and not pay taxes?? It seems like a no-brainer now, why didn’t I consider this as an option earlier?

So I set out to open my Roth IRA. Opening with Vanguard was so easy. It took less than 5 minutes. I had to start with $1,000 in a STAR fund, and I’m going to contribute as much as possible (after making my regular contributions to the emergency fund) until April 15, which is the cutoff date for 2009 contributions. Also, I’m stopping my Roth 401(k) contributions for the time being and using all that money to go toward the Roth IRA. That way I’ll be able to take full advantage of all my Roth options for the 2009 year. After my 2009 contribution window closes, I’ll contribute my regular 401(k) amounts to my 2010 Roth IRA plus the amount of any additional investing I want to do. Once I reach $5,000 of Roth IRA contributions in 2010, I’ll go back to contributing to my Roth 401(k) through work.

So why not just change my investments from Schwab brokerage to Roth IRA and leave the 401(k) alone? For flexibility. No matter what, I’ll always have my Roth IRA contributions to withdraw, penalty-free at any time. With a 401(k), there are rules for when I can withdraw, even the contributions, without penalty, and I wouldn’t qualify. So I’ll max out my Roth IRA contributions first because I see no reason not to.

My goal this year was to contribute $5,000 to my retirement funds, and that is a goal I will keep in mind. Anything above $5,000 will be my investing money, and at the end of the year, will just be my total contributions minus $5,000. Although it will seem like I am putting a lot of money away in retirement accounts this year, I will still have to remember that some of that money, while in a retirement account, will not be used for retirement purposes. But if I’m lucky, I won’t be tempted to withdraw it at all and will continue to take advantage of the tax-free interest I’ll be earning.

I recently read Vanguard’s article about debt and spending, and it was no surprise that it brings up the idea that people are not as rational as economists and authors think.

There’s a reason that so many Americans are in debt and the savings rate is so low.

There are several examples of people acting irrationally. The first example is of MIT students give the opportunity to buy Celtics tickets at auction. Half were told they must pay in cash while the other half could pay with a credit card. On average, the credit car bidders were willing to pay more than twice as much for the Celtics tickets than the cash bidders.

I’ve read about several people who decide to cut up all their credit cards and go with a cash only system, but I had no idea that this was such a big problem for everyone. I’d like to think that I’m immune to the problem, but this study shed some light on situation and is making me rethink whether I too spend significantly more when I use my credit card.

The second situation deals with a windfall. Harvard students who were given a $50 “tuition rebate” spend just $7 in the first week, while those who were given a “bonus” of $50 spent and average of $31 in the same time period.

I know exactly how I’ll spend my “bonus” windfall, and am planning on sticking my entire tax refund (~$400) into emergency savings. While I will only be spending 10% of my bonus on myself, I definitely see the rebate as getting money back because I overpaid rather than a bonus for something I did well, which deserves a reward.

The 3rd example of 68% of respondents being willing to drive 20 minutes to save $5 on a $15 calculator as opposed to 29% who would be willing to drive the same amount to save $5 on a $125 jacket makes no sense to me.

20 minutes is too much of a hassle to save $5 on a calculator. Once I’m in the store, I don’t feel like going so far out of my way for what I need. My solution to this question would be to stay home and find a better price on the Internet.

The last example is of Cornell students in 1985 who, whlie at the beach, were willing to pay an average of $2.65 for a beer when they think it comes from a fancy resort hotel, while only $1.50 if they think it comes from a run-down grocery store.

When I’m out with friends, I’m definitely willing to spend more because it’s part of the experience, while I’d never dream about spending $5 for a bottle of beer when in the comfort of my own kitchen.

We’ve learned some interesting lessons from this, and it’s clear that people aren’t rational with their money. Make conscious decisions about what you spend, the leave the credit card at home if you’re tempted to break it out, and most importantly, for cheap beer, go back to 1985.

This article referenced some of the top colleges in the country, so I’ll end with the only Ivy League joke I know:

A Harvard man and a Yale man are at the urinal. They finish and zip up. The Harvard man proceeds to the sink to wash his hands, while the Yale man immediately makes for the exit.

The Harvard man says, “At Hah-vahd they teach us to wash our hands after we urinate.”

The Yale man replies, “At Yale they teach us not to piss on our hands.”

Even Ivy Leaguers are irrational sometimes.

It’s Sunday, which means the Your Negotiators contest is over and we’re here to announce the winners. And they are…@bucksome, @mgmommy0930, and Michael. Congratulations! They’ve been contacted and after working with Your Negotiators, hopefully we’ll get a testimonial about how the experience went.

This week’s must-reads:

Two are from Financial Samurai, who had some very interesting and thought provoking posts: The first is the Alexa Ranking Challenge, which you’ll hear more about a little later in the week here, and Tax Refunds Are Good For Most People, Because Most People Can’t Save.

MoneyNing asks: Are Your Money Matters A Bunch Of Lies? The post goes into several ways we tell ourselves lies when it comes to money.

The Frugal Lawyer details her experience Saving Money With Cox And Verizon Wireless by using SIMPLE ways to shave $240 off her cable and cell phone bills.

Fiscal Geek answers a reader question about the American Dream becoming a Nightmare.

20 Something Finance explains all about the Retirement Contribution Credit. I got so close! The very last line of his post got me! Grrr

The following carnivals included my posts this week!

Ultimate Money Blog hosted the Money Hacks Carnival – How To Use A Windfall

Million Dollar Journey hosted the Carnival of Personal Finance – Impressing Your Friends Can Cost You

Cooking Manager hosted the Festival of Frugality – Guest Post at You Have More Than You Think – The Pinnacle of Frugality

The Carnival of Debt Reduction – Guest Post at Money Relationship – Why I Don’t Stress About My $23,000 Pile Of Debt