Wide Open Wallet

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Archive for April, 2008

The economics of Radiator Springs

Having a two year old boy in my house means that Disney’s movie Cars plays on a continuous loop in my family room. I’ve seen that movie about 700 times in the last month. I’ve noticed it actually teaches a little something about the economy.

Ok, in the movie the main character, Lightening McQueen (the world’s fastest race car), gets lost and ends up stuck in this little town in the middle of nowhere called Radiator Springs. The town is basically a closed system, economically speaking. No one ever leaves the town and no one ever comes in. Each character has their own business in the town and the limited amount of money just flows around between them all. (I’m not going too in-depth here, ignore the fact they would be paying taxes and buying supplies from outside their town.)

Flo owns the gas station. Ramon owns the body shop. Guido and Luigi own the tire shop. Sally owns the motel. Filmore owns an organic/ hippy store. Sarge owns a military surplus store. If Flo buys tires from Guido some money flows from Flo to Guido. Guido might use that money to buy something from Sarge, who then gets some body work done at Ramon’s shop. Ramon then uses the money to buy gas and the money has returned back to Flo and the cycle continues.

In one part of the movie a pair of lost tourists actually comes wandering though town and everyone does their best to sell their wares to the pair. Unfortunately they leave without spending a dime, but lets say they stopped and got gas. The money they spent would have been money added to the system. More money for everyone, it would be Flo’s money at first but if she spends it in the town everyone gets a little bit richer. If Flo decides not to spend it in town and instead takes that extra money and goes on vacation to Mexico then no one in the town benefits. The money leaves and doesn’t come back. It’s as if the tourists never came by.

Now if you think of Radiator Springs as our country you can see why it’s important to buy American made products and why we want other countries to buy the stuff we have to sell. We want to keep our money in our town and bring in money from outside. It benefits everyone, not just the businesses that made the initial sale.

This is the idea behind he stimulus checks we will all be getting soon, to add money to the system. They could have done the same thing with some government spending, but sending a check to everyone is just so much cooler.

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  • Another point of view.

    Be This Way has posted a response to my life insurance for kids post. She gives the reasons why kids should have life insurance. Like most things in personal finance, there are at least two answers to every problem. So please check out her post for another view on life insurance for kids, it’s interesting.

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  • Frugal Eats: Garlic Lime Chicken

    Here is a recipe for Garlic Lime Chicken. It’s super flavorful and really quick and easy to make. I’ve calculated the cost to be $10.09 for 6 servings. Or $1.68 per serving. One thing I like about this recipe is that you can make as little or as much as you like. The recipe is intended to make 6 servings but if there are only two of you, you can just cook two servings. Sometimes it’s good not to have leftovers.

    When I make the spice mixture I make a quadruple batch and keep the extra in a little Tupperware container in my spice cabinet. That way I have it on hand all ready to go. It makes this recipe really easy to just whip up in about 15 minutes. I usually serve it with mashed potatoes. I like to get a bite of chicken along with a bite of potatoes together on my fork… MMMMM.

    Garlic Lime Chicken
    Serves 6

    • 1 teaspoon salt (less than a penny)
    • 1 teaspoon pepper (.07)
    • 1/4 teaspoon cayenne pepper (.11)
    • 1/4 teaspoon paprika (.04)
    • 1 teaspoon garlic powder (.03)
    • 1/2 teaspoon onion powder(.02)
    • 1/2 teaspoon thyme (.26)
    • 6 boneless skinless chicken breast halves (9.00)
    • 2 tablespoons butter (.05)
    • 2 tablespoons olive oil (.20)
    • 1/2 cup chicken broth (.04)
    • 4 tablespoons lime juice (.27)

    In a bowl, mix together first 7 ingredients. Sprinkle mixture on both sides of chicken breasts.

    In a skillet heat butter and olive oil together over medium high heat. Saute chicken until golden brown, about 5 minutes on each side. Turn down the heat, remove the chicken (keeping warm) and add the lime juice and chicken broth to the pan, whisking up the browned bits off the bottom of the skillet. Keep cooking until sauce has reduced slightly. Add chicken back to the pan to thoroughly coat and serve.

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  • Summer break

    Here in the Arizona it’s hard to find activities to keep the kids busy on summer break. It’s not like normal places where the kids can go ride bikes with their friends til dusk, temps regularly get over 110, even in the shade. It’s dangerous to spend any extra time outside. So come summer break, all the parents start looking for fun indoor activities that will keep their kids busy.

    In an effort to fill that need the movie theater has a pack of 10 summer movies for $7. They play a kid friendly movie once a week for 10 weeks. You buy the tickets to all the movies ahead of time. It would cost me $21 to participate because there are 3 of us. But that is still a really good deal. The problem is that I don’t know if my 2 year old would sit still for a movie. I know it’s a kids movie and that there will be lots of other little ones there, it’s not going to bother anyone if he gets a little rowdy, but still… I don’t know if he would have fun.

    If you don’t want to buy all the tickets at once you can also pay $2 per movie. While it’s more expensive over all, it’s great if you know you can’t make it to all 10 movies. It will cost me $6 per movie but then I’m not committed to go every week. But if I end up going to all 10 then it’s going to end up costing me $60, which is significantly more than the $21 I could pay right now.

    Decisions. Decisions. I will probably just go with the $2 movies this year to see how it goes.

     

    pic by JanneM

     

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  • Roundup

    Happy Saturday! I have a great roundup for you this week so let’s just jump right in…

    First of all I participated in two carnivals. I participated in the Carnival of Personal Finance and the Carnival of Money Stories. So make sure you check them out.

    The PF Bloggers:
    No Debt Plan showcased the weehouse. I find little houses like this amazing. I can’t imagine living in one. It takes a special person to live in a tiny house. They obviously don’t have kids.
    Master Your Card reminded everyone that yard sale time is coming. Read his post to brush up on your yard sale skills.
    Pinching Copper took the stance that the housing bailout is a terrible idea. Leave a comment and let him know your opinion of it.

    Around the blogsphere:
    Frugal Dad highlighted how he pays his kids allowance. We do generally the same thing but on a lesser scale.
    Blunt Money posted snippets from an article about a real estate agent who got caught in the housing bubble. She says it’s pathetic on so many levels and I couldn’t agree more.
    Remodeling This Life reflects on the Velveteen Rabbit and what it means to “be real”. I haven’t read the Velveteen Rabbit in years, I think I will read it again as soon as I get the chance.
    Tight Fisted Miser told a story about how a Mexican fisherman is living the dream and teaches an investment banker a thing or two. I loved this story!

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  • I deserve it.

    “I deserve it.”

    This is a phrase I’ve been really paying attention to lately. It started while I was watching Deal or No Deal. What is it about that show? I can’t look away if it’s on. My favorite part is the supporters. I am always just amazed at their logic when it comes to giving advice to the contestant. Someone always gives a speech about how wonderful the contestant is and how they deserve to win the million. As if a game of luck has anything to do with what they deserve. And then they actually convince the contestant not to take a life-changing amount of money because they deserve more. The last show I was watching the guy had an offer of $144,000. His brother told him not to take it because he deserves more. He turned it down, opened his only big case, and his next offer was $26,000. Which then his brother told him to take that because he deserved it. Huh? That makes no sense! This is where I start yelling at the TV.

    So now anytime I hear the term “I deserve it.” or “You deserve it.” it really catches my attention. My best friend recently sent me an email saying that she was thinking about getting a second job because bills are tight. Ok, I’m a total supporter of that if it’s necessary. I’m glad she is seeing a problem and is willing to work hard to fix it. My response to her was to ask if there is any spending she could cut. I explained that less money going out is the same as more money coming in. She wrote back and said the only thing she spends money on that she doesn’t have to is iced coffee, but that she doesn’t want to cut it out of her life because… “I work hard and I deserve it.” And there it is. She deserves it. I replied with the thought that maybe what she deserves more than iced coffee is the luxury of not having to get a second job. She had mentioned that she only gets it on work days and that it only costs $2.38. The more questions I asked the more info started coming out. She actually gets two a day, and if she is honest she doesn’t only get them on work days, she gets them everyday. I know from hanging out with her that she always leaves a tip. So $2.38 is really $3.00. Working out the math for her I figured she is spending almost $200 a month on iced coffee. She was shocked! She had never questioned how much money she was spending because she had rationalized that she deserved it. So she has decided to give up her beloved iced coffee so she can have what she really deserves… time with her family.

    So what do you deserve? Are you giving up things that you genuinely deserve, such as time with loved ones, because you have things you have convinced yourself you deserve, such as a fancy car?

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  • Costs to raise a child

    The other day Tight Fisted Miser mentioned it costs 200,000 to raise a kid. While he disagreed with that figure, I don’t think that number is exceptionally high.

    It’s a difficult thing to calculate because there are so many variables. Plus, it’s hard to say what exactly my expenses would be if I didn’t have kids. But I’m going to give it a shot…

    When I met my husband he owned a house with a $900 mortgage. Because I already had a daughter and we wanted at least one more kid we decided to buy a bigger house. Our mortgage payment is about $300 a month higher on our bigger home. So, $300 a month for 18 years is $64,000. Granted we have two kids so that is really $32,000 per kid, but we’ve already made a dent in the $200,000 and all we’ve done is provide a roof.

    Food is tough. Let’s say $100 a month per kid for the first nine years and then $150 a month after that. Which would be $27,000 per kid to eat for 18 years.

    Ok, so we’ve provided food and shelter. Let’s move on to clothing. I probably spend less than average on clothing. For one thing we live in a very warm climate so I don’t have to buy expensive winter clothes. Secondly, I hate clothes shopping so I do as little of it as I can. That said, I probably spend about $250 a year on clothes, per kid. Obviously as they get into the teenage years I’ll get talked into spending that just on sneakers, so let’s call it an average of $500 year. That gives us $9,000 to clothe one kid to age 18.

    So far, we have spent $68,000 and have only provided the basic minimum required for human life. For the first five years someone is going to need to provide care for the child every second of every day. That is going to require daycare, or a loss of income. Either way you go it’s pretty expensive. Paying for daycare is what most people do so we’ll go with that. Around here, you could probably find a home daycare for about $125 a week, per kid for the first 5 years. Which gives us $32,500. But if your working full time you are going to need after school and summer care until they are about 12. According to the public school website in my area after school care runs $60 a week and summer care is $135 per week. You could probably find it cheaper but this is the school-sponsored program so I’m going to use these figures. That gives us another $25,000 in day care costs, for a grand total of $57,500! If that isn’t enough to make you run out and re-fill your birth control, I don’t know what is.

    So, with these figures we’ve determined that food, clothing, shelter and daycare cost $125,500. But kids need more than just the bare minimum. They need toys, books, transportation, school supplies, after school activities, birthday parties, Christmas gifts, furniture in their rooms, Halloween costumes, doctor visits, hair cuts, braces, family vacations, college, ect. It’s an endless list really. I think over the course of 18 years a person could easily another $75,000. If you spend $100 per birthday, $200 at Christmas, and spend $2,000 on a family vacation every other year, you’ve already spent $23,400.

    My conclusion is that I don’t think $200,000 to raise a child is really that outrageous. In fact, it seems pretty accurate to me. Thoughts?

    pic by: lucias clay

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  • Kids don’t need life insurance.

    As soon as your name is put on the first mailing list of new or expecting parents you start getting advertisements for life insurance on your baby. This has always made me kinda crazy. Kids don’t need life insurance!

    The point of life insurance is to replace your income (or services, for the stay at home parent) so that your dependents can continue their standard of living. So unless your newborn has an income and dependents they don’t need life insurance.

    First off, it is very unlikely that the worst will happen. But if it does you should use your emergency fund to pay for the funeral and other costs. I really can’t think of a bigger emergency that could occur. If you don’t have an emergency fund then you should be saving every extra dollar and not buying things like life insurance on your kids.

    One advertised benefit of baby life insurance is that it’s a whole life policy. Which means that it doesn’t expire like term life does. Most financial planners avoid whole life policies even for adults. You pay more for whole life because some of your payment is invested which builds the cash value. Financial planners argue, and I agree, that you should pay less for the life insurance and invest your money yourself.

    Another stated benefit is that between the ages of 21 and 28 the child has the option to double the amount of their policy no questions asked. Which means that if they are uninsurable because of a disease they can still get life insurance. First off, it’s highly unlikely that at age 21 they will be ill enough to be uninsurable. And secondly, even if they double their coverage, it still isn’t very much life insurance. The largest amount available with the Gerber life insurance plan is $35,000. So, at age 21 they would only have $70,000. That isn’t going to be enough if they have children. They would still need to buy more life insurance.

    The only good thing I can say about this type of insurance is that it isn’t very expensive. A death benefit of $5,000 is $3.18 a month for a newborn. The most expensive plan they offer, according to a flier I received, is a death benefit of $35,000 for $33.04 for a 12 year old. I guess if you are debt free, have a fully funded emergency fund, retirement plan, and college fund and you still wanted to buy life insurance on your newborn I wouldn’t try to stop you. But unless you fall into that almost non-existent category, I ask you to think twice about this purchase.

    Picture by: sean dreilinger

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  • About a year ago my mother in law bought me a muffin cookbook and started me on my muffin obsession. These are great. I love the cinnamon sugar topping. Mmm… Plus, for a grand total of $1.69 how can you go wrong? And they have another feature I love in that all the ingredients are things you can keep on hand.

    A word of advice, the first time I made these I thought I knew better and put more than a teaspoon of jelly inside each one. But then there was so much jelly inside that the muffins couldn’t stay together.

    Muffins
    1 ¾ cup flour (17 cents)
    1 ½ teaspoon baking powder (2 cents)
    ½ teaspoon salt (less than one penny)
    ½ teaspoon nutmeg (30 cents)
    ¼ teaspoon cinnamon (1 cent)
    3/4 cup sugar (14 cents)
    1/3 cup vegetable oil (13 cents)
    1 egg (16 cents)
    ¾ cup milk (12 cents)
    10 teaspoons jelly (15 cents)
    10 muffin papers (20 cents)

    Topping
    ¼ cup butter (30 cents)
    1/3 cup sugar (5 cents)
    1 teaspoon cinnamon (4 cents)

    In a large bowl, combine flour, baking powder, salt, nutmeg, and cinnamon. In a small bowl, combine sugar, oil, egg, and milk; stir into dry ingredients just until moistened.

    Fill greased or paper lined muffin cups half full (use an ice cream scoop!); place 1 teaspoon jam on top. Cover jam with enough batter to fill muffin cups three-fourths full. Bake at 350 for 20 to 25 minutes or until a toothpick comes out clean.

    Place melted butter in a small bowl; combine sugar and cinnamon in another bowl. Immediately after removing muffins from the oven, dip tops in butter, then in cinnamon-sugar. Serve warm. Yield:10 muffins.

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  • Filed under: Frugal eats
  • 529 plans

    Today, I have another guest article from “Bruce the tax guy” about 529 plans. There is so much to know when it comes to saving for college it’s impossible to keep up. I hope this article sheds some light on the topic.

    *************

    Hello again,

    A 529 plan simply put is a college savings plan. There are two types of plans. Plan A: Pre-paid tuition plans (sometimes called guaranteed savings plans and offered in 15 states), and Plan B: college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plans. In addition, a group of private colleges and universities sponsor a pre-paid tuition plan.

    Plan A: You pay the cost of tuition at today’s prices for the designee/s to attend later. The earnings here are basically what the difference is in tuition today from what it will be at the designee’s start time.

    Plan B: Savings plans are different in that your account earnings are based upon the market performance of the underlying investments, which typically consist of mutual funds.

    So how do they help your State return?

    I could explain every States individually but will only briefly list the three main States where the majority of my practice resides. (I am current with 28 States 529 Plans)

    In my home of residence, Missouri:

    · Your assets grow tax-deferred

    · withdrawals are exempt from state income tax when used for qualified higher education expenses

    · Missouri taxpayers can deduct up to $8,000 in contributions ($16,000 if married filing jointly) from their state income tax each year

    Where I started my practice, Iowa:

    · taxpayers can deduct up to $2,595 in contributions (adjusted annually for inflation) per beneficiary from their state income tax. For example, a married couple with two children contributing to separate accounts can deduct up to $10,380 (that’s 4 x $2,595) for 2007

    Thirteen miles to my west, Kansas:

    · Any contributor may deduct up to $3,000 for single filers and $6,000 for joint filers per beneficiary for contributions

    · follows federal treatment

    · offers state matching grants for “Learning Quest”

           o residents with household income lower than 200% of the federal poverty level ($42,400 for a family of four) can receive a match when they contribute at least $100 and up to $600 in 2007 and 2008.<!–[endif]–>

    With the examples above I hope you can see the benefits each has and that each state varies. With one big similarity, a deduction for contributions made.

    Okay I will bet your hoping all this fun is over.

    A few more quick thoughts if you please;

    · Most States require residence in order to take the deduction

    · In most cases if your designee decides not to attend college you can change to a family member of the original designee

    · Funds withdrawn for non college uses will be taxed and add back rules could apply to your States return

    · Anybody can contribute to the fund

         o Meaning you open a fund for your child/ren and Grandparents, Aunts and Uncles’, Brothers and Sisters, etc. and contribute to it/them

    Okay, If you have any questions about 529 plans, I have several links listed below or I will be glad to help. Contact me I may not have the immediate answer but I’ll bet free return preparation (from my office), I can find it.

    College Savings Plans Network

    U.S. Securities and Exchange

    College Savings Without the Tax Bite

    529 College Savings Plans – Internal Revenue Code Section 529

    With tax season at an end (sorta), I will have more time for my site. I plan on having more 529 information there soon.

    Bruce “the tax guy”

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  • Filed under: saving
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