How You Can Pay the LOWEST Price for Electronics, Computers and Cameras

Live your life for less . . . How to live above your means without Debt!

You decide you need (or want) a new 42" HDTV, or laptop, or a digital camera. That's OK- its part of taking advantage of technology. What is not OK is paying too much for the privilege.

First, we will go over some basics, then go to the real way to painlessly get the best price and finally provide you with a way to (possibly) save even more on your best deal.

First, some basics. Try not to buy a technology product when it first comes out. Techno-geeks and other early adopters will keep prices high (the iPhone sold for a $500 premium the first week it was out; within a month you could get discounts). I usually buy electronics that are one-to-three generations removed from state-of-the-art. Optimal purchasing is the marriage of performance (that you want and value) and price. Some products like computers have huge prcing differences for tiny differences in performance (which become "invisible", as technology advances, in months). I remember when I bought my first computer- I splurged for the extra 128 meg of RAM (a rounding error within a year)! A lesson learned for "only" $145! Anyhow, the optimal (or close to) price performance targets for:
- Computers: one generation (only the hottest, newest commands any sort of premium)
- HDTV's: two generations (close-outs at 30-40% off for 3-5% "value" difference)
- Camera's: two generations (close-outs at 40-60% off with a 5-10% "value" difference)
- Video game systems: One generation (still current, but 50% off, with lots of available used games)

For most technology, you can determine generations by looking at the features being promoted in the newest models. Speed or RAM on computers, lines and sound on televisions, megapixels and "recharge" time on cameras, etc. Find the state-of-the art, which is usually completely irrelevant once you actually use the product, and look for one-to-three generations back. This is where the sweet stop of price and performance meshes. Real life example, I'm typing this on my Toshiba laptop with only 1MB of RAM, which works 100% as well as the Dell with 2MB of RAM (and a faster processor) that I have in my office (and was purchased a few months later for about 100% more). And to prove, I'm not perfect (my wife will be happy to provide more examples), my mother bought a similar laptop six months after I did- and paid about 20% less!

More basics. Determine which product(s) you really want. For example, I recently bought a digital SLR camera for my wife's birthday. I did research in a camera magazine and on-line. I narrowed my choices down to three targets and went looking for the best deal. At the end of the day, most products are roughly similar in function and quality. In this example, I liked the Canon (probably because they did the most advertising and I was familiar and "comfortable" with the product). However, in my research I noticed the Olympus was very strong. When I was buying, I was able to get a much better deal on the Olympus and "saved" over $200 for what, in my mind, was a virtually identicle product (which I love). By the way, I bought one generation old, 8 megapixels vs. the then state-of-the art 10 megapixels.

Well you get the idea.

OK- now hear comes the meat and potatoes of this post. All electonics (and most products for that matter) are essentially commodities. They all have UPC codes. At the end of the day, you don't care where you buy your new camera, all you care about is how much it costs. Here is what you do. Go to a price comparison site. My favorite is CNET (www.cnet.com). Pricegrabber (www.pricegrabber.com) is another site. In the search box enter the UPC code of the product you want. In seconds, you will learn the cheapest place what you want (and likely save big bucks and a lot of time).

The site will search its database with the UPC number you entered and show you all the stores selling in its database that sell your camera (or whatever you want). Most of these stores also have a consumer experience rating. Find the cheapest product (make sure you enter your zip code so the site can calculate shipping), from a store with a high rating (very important); virtually all on-line stores that do any sort of volume will offer good service. Also, make sure you are comparing new products to new or refurbised to refurbished. There are fantastic deals on refusbished products- just make sure you know what you are buying.

If you have plenty of time, you can try a more general search, like 8 megapixel SLR. You will see various products matching your description with the cheapest price for each. Using this technique, I learned that I really did love the Olympus (as it offered everything I wanted for a significantly less money). Still remember the caveat to only do business with stores with a strong consumer ranking- let others be the guinnea pig, you just want to save money.

In the extremely unlikely event, you don't get what you ordered (or its damaged, etc.), return the product (certified mail) and dispute the charge on your credit card (I have never had to do this, but you should know and take comfort in the procedure).

Want to make this an even better deal? Go to a rebate site (more about these in another post) like ebates (www.ebates.com- if you want, you can tell them homebrew65@yahoo.com sent you!). In the search box, type in the store with your product. Depending on the product, you have a 30%-70% chance of saving an additional 2%-5% (not big bucks, but enough to make 5 minutes of clicking worthwhile).

Take care and good saving-

Tony

Investing 101 . . . No need to pay commissions

Save More, Spend Less, Retire Young and Rich (or at least not poor)

Simply put, Americans don't save nearly enough for retirement. The same foolish attitude that seeks immediate gratification will keep many of our neighbors working into their 80's. The antidote to having to work (as opposed to wanting to work) is saving enough money to fund your retirement.

You should try to save about 10% of your post-tax income. If you have the opportunity to invest in a 401k you should ALWAYS invest to maximize your employers match. Next dollars go to pay off your credit cards (reducing debt is a great way to save as your return is the interest you don't pay- up to 24% after tax). When you are debt free (excluding your mortgage) max out your 401k. If you can still save more, than just use after tax money to buy index funds (see below).

A general rule of thumb is that you should retire with 16x your income. Where does the 16x come from? Well, you will spend about 80% of what you made (because of lower taxes, not needing to save, social security at the right time, etc.) and you should be able to withdraw about 5% each year. So, if you made $100,000/year, you need about $1.6 million to maintain your lifestyle. You also need to keep your investments growing, so investing for the long term (remember, you will have +/- 30 years in retirement) is key. The only way to invest for the long haul is stocks.

If you are more conservative/cautious and wish to protect yourself against unforseen expenses or a series of bad years in the market, you can shoot for 20x (or more). But remember, life is for living, not working so long, so one day you can stop working (you can always work during retirment if you feel the need to supplement your income/savings).

You Need Stocks
Unless you think the world is falling apart, which makes investing fairly irrelevant, you need to be in stocks. You do not need to pay anyone a piece of your hard earned savings to invest for you or tell you what to invest in. The only think you need to do is to buy two index funds.

Index Funds Baby
Two index funds? The first is an S&P 500 index fund, the second is an international index fund (be sure it is an international, sometimes called a global, index fund, not an emerging market fund). As the world is becoming more global, it is important to participate in its growth. An international index fund not only broadens your investment reach, it diversifies you against weakness in the US dollar and domestic economic weakness. In spite of recent domesic weakness, the US economy is an innovative force for growth and you need to make a S&P 500 index fund a core part of your portfolio. I'd recommend investing 75% of your savings in a domestic index fund and 25% in an internation index fund. Both the Fidelity (www.fidelity.com) and Vanguard (www.vanguard.com) company's offer these index funds. You can invest completely on line or talk to a customer service representative. They tend to be knowledgeable, are not commission based and can give you the information needed to invest.

Why Index Funds?
The advantage of an index fund is that it has low annual costs (no sales or redemption fees) and mirrors the overall market. Year-over-year, you want market performance (not shoot the moon, high risk investments). That strategy, over the long term, should be enough to keep your account even-to-growing on an inflation adjusted basis

You will never see this in a mutual fund ad, but year-over-year over 75% of actively managed funds underperform the market. You might get lucky, but chances are you will not. Essentially, actively managed performance is like a person flipping a coin- you can flip a coin, call heads and get heads, maybe you can do this three or four times in a row- that is luck, not a special penny flipping skill. Essentially, picking an actively managed fund is like flipping pennies, except the flipper gets a piece of your money. Actively managed funds have to pay the active managers (a lot), their staffs, travel, etc. and provide the fund company (Fidelity, etc.) with a return on its investment. Who pays for all of this? You do- via management and other fees. Index funds, by definition, mirror a pre-defined index. They are "dumb" funds with no active management. Costs are very low and the fund company can still make money charging one tenth of one percent in fees (an added advantage is that the fund companies know investors pay particular attention to the management fees on index funds and keep them extra low, as a kind of "loss leader").

To best average your costs, try to make periodic purchases. That way some will be high, some will be low, but on average you will be OK.

Never Buy Funds Through an Advisor
Advisors may be smart and well intentioned. However, they almost always are something else as well- commissioned. They are incented to promote a fund family. Guess who pays their commission- you do. Don't. You don't need to. You can get the best funds- the best expected value (that is taking risk and return) by buying index funds.

What About Picking Your Own Stocks
I don't recommend it. Take me for example. I'm financially astute. I follow business, economic trends and the performance of companies as well as the stock market. I'm a horrible stock picker. In fact, even though I know I shouldn't, sometimes I can't help myself and I buy a stock- because it is incredibly clear (to me) that it is going to go up. And sometimes they even do go up. However, many times they go down (way down). Why? Who knows. An analyst comes out with a negative report (GE- down 10% in the last month). There is a fear problems may be deeper than suspected (AIG- down 20% in the last month). Earnings missed "expectations" (AMD- down 30% in the last two months). The list goes on and on. Skip the drama, buy index funds and over the long term you will earn 8%-10%, a 5%-7% premium over inflation and enough to fund your retirment.

Good night-

Welcome to living beyond your means . . . without debt

I grew up working class poor. My parents were immigrants from Hungary and worked their tails off. However, not having grown up in this country, they often overpaid when making significant purchases. For people who made very little money, overpaying was a really big deal. As the son who first observed, then learned and finally taught- it was a stunning realization that there are ways to get more for less! Getting what you want for less is like getting a raise! It is like staying at the Ritz and paying for a Holiday Inn (more on that later)! It is like paying for a Chevy and driving a Mercedes (more on that later)!

A little about me. I'm a money guy. I having my B.S. in accounting and an MBA in finance and corporate strategy. I've been the CFO and COO of public and private companies as well as the Managing Director of a turnaround consulting firm. Essentially, people hire me to, on a corporate level, figure out how to maximize assets, create strategies and how to stretch that scarcest of corporate assets . . . cash (every company I have ever been associated with is short cash). I'm the guy who develops Fortune 500 strategies on start-up budgets. So you can say, figuring out the how to get more from less is what I do (though strategy is my real talent).

My goal is to share some of my insights with you.

Lesson #1- Life Insurance

This might be a boring lesson to start (I told you, I was a finance guy not a marketer!), but life insurance is very important and something that most people pay 3x to 10x more than they should pay.

1) Simply put, if you have kids and aren't rich, you need life insurance. If you die, you shouldn't condemn your spouse of kids to a crummy life. It is bad enough losing a parent, but to deal with that and losing the house, the car, the school district, etc. can be devestating. Life insurance, if bought correctly, is not that expensive and should be part of everyone's portfolio.

2) A good rule of thumb is about 10x your income ($1 million for a limit). We can argue about amounts, but 10x is not unreasonable to pay for and will significantly assist your loved ones. It is also fairly easy to buy.

3) Term life only. This is where most people go wrong. Life insurance is one of those things that isn't bought as much as sold. Think about that. The guy who is selling is primarily movitated by commission. Commissions are huge on whole life, they are small on term life. But, I can hear someone saying, "you get a cash benefit with whole life ". Yes, but only because you over paid to begin with. There is a simple saying to keep in mind, "buy term and invest the difference". Boom, easy, end of story.

4) Don't buy term from a salesperson. I remember when I was 28, somebody was "nice" enough to introduce my to a Northwest Mutual agent. He "sold" my a one year, $100,000 term policy (because I was smart enough to know not to be suckered into whole life) for $420. What a deal, right? Wrong. The premium was a rip off. The salemen was getting rich on his commission. Today I have a $1 million, 10 year level premium (the premium stays the same for 10 years) for which I pay $275 per year (I am in my 40's now). So, I'm getting 10x the coverage I did over 10 years ago for about 30% less!

5) Buy your insurance online, from a broker such as insure.com (I've bought from them and no, I don't get anything for recommending them). The online brokers don't have salesmen to pay. They don't have big TV commercials to subsidize. They don't only sell one product. They have a low cost structure. They maket policies from most carriers so you can pick the one you want; cheapest is generally best, though it always makes sense to check the carrier's financial strength (the online broker usually provides this information). An online broker, like a salesman broker will arrange for an independent company to visit you and give you a simple exam (blood pressure, pulse, blood sample, height, weight, etc.). There is no cost to apply for a policy.

5a) Associations are good placed to buy life insurance if your health is not the best. Because there is one rate structure, and generally a yes/no answer the rates are higher, but association policies may offer may latitude in who is accepted. I'd still start with the online broker. These is no cost to apply for a policy.

6) Buy term life. Term life keeps your rate flat during the term of the policy (e.g. 10 year term keeps the premium the same for 10 years). Unless you are worried about your health declining, it is usually best to buy 10 year term. After 10 years, you can always get another 10 year policy (though prices increase as you age). If you want to lock in, a 20 year policy is a good choice for a new parent.

7) Don't buy life insurance from your employer unless you are in poor health and/or old. Employer-sponsored plans are universally poor. They typically are very expensive. You may get some free insurance- OK. But don't buy more here. The policy is could be as much as 50x more than a policy from an online broker (especially if you are not older and not in poor health).

8) Keep your policy information with your important papers. Don't keep your policy a secret. The last thing you'd want is to pay for the policy and not have the benefits available to your loved ones.

9) Life insurance is tax free.

10) Life insurance is priced based on age and health. If you smoke, you will pay more. If you are a bad driver, you will pay more. If you are in poor health, you will pay more. None of these are reasons not to get life insurance.

11) One of the best reasons to have life insurance is piece of mind. Chances are, you'll never use it, but it will make you (and your spouse) feel better.

12) Stop your life insurance once the kids graduate.

We will do something more "interesting" next time. Until then remember, "you can live beyond your means without debt!"

Tony