ICFE eNEWS #09-05 - March 12th 2009

People no longer hearing spend, spend, spend when their money talks.
Now it's save, save, save.
A list 15 things people still are paying too much for

San Diego, CA. - It used to be, not that long ago, the majority Americans were hooked on spending and many were borrowing and spending. When Americans used to hear their money talk, it screamed spend, spend, spend.

What a turn around after six months of economic downturn and uncertainty. Now, when people hear their money talk the urgent new message they are hearing is save, save, save.

American consumers have dramatically cut their spending as they worry about losing their jobs and earning less in a deteriorating economy. The personal saving rate in the last three months of 2008 rose to its highest level in six years, according to Vengroff, Williams & Associates Inc, an Orange County, CA receivables consulting firm. The personal saving rate of 2.9% in the fourth quarter of 2008 was the highest since early 2002 when the country was recovering from the dot-com recession and the shock of the attacks on Sept. 11, 2001. The savings rate rose to 3.6% in December, from 2.8% in November. VWA expects this significant increase to continue longer term, at least thru the tax season, as consumers typically use refunds to pay down debt.

There are still many signs observed by financial educators and credit counselors that consumers are over-spending because many are still paying too much for things. Over-extending was the number one form of consumer overspending..

BillShrink.com has developed the following list of 15 things consumers commonly overpay for in today's economy. This list includes costs that can easily be avoided, or reduced if customers are willing to shop around or plan ahead.

1. Pseudo Health Products - Like the "protein bars" that are presented as "low fat" or "all natural" even though can end up just as unhealthy as candy bars (the sugar!), while costing up to five times as much.
2. Brand New Technology - It is well documented that technology prices come down considerably once new products have been on the market for several months to a year. Additionally, waiting allows time for other companies to release competitive technology, presumably leading to better overall products becoming available in the marketplace.
3. Bottled Water - This is probably the most overpriced of all regularly consumed products. Over 2/3 of the world is covered in water, and filters to covert 'tap water' into filtered water are readily available for under twenty dollars. However, millions of people choose to spend $1-$2 on this convenience item each day.
4. Individual Coffee Cups - Individual cups of coffee purchased anywhere, whether from restaurants, gas stations, or coffee shops, are invariably priced high. Especially when compared to what one could buy and prepare coffee for in bulk at home.
5. Prepackaged Food - Buying prepackaged food items such as sandwiches, sliced apples, or desert cups is one way of overspending on products that are relatively easy to make, and less expensive then when you buy the ingredients which can also give you more servings.
6. Brand Accessories for computers - Computer manufacturers have built a cult-following over the past decade, and they are able to demand premium prices for many of their aftermarket accessories. There are, however, a number of manufacturers that make products that are compatible with mp3 players and other products, available for a fraction of the cost.
7. Sending a Fax from a Business Center - There are a number of free web-based fax services, for which you only need an email address and a scanner. Sending faxes from places such as Kinkos can cost $1 per page for local, and $2 per page for long-distance faxes.
8. Car Maintenance from the Dealership - Unless a car is under warranty, going to a dealership for a repair is one sure way to overspend. Car dealerships often promise that certain work can only be done by authorized dealerships, and are less-inclined to negotiate prices, something that should be done with any type of auto maintenance.
9. Music - There is no longer the need to purchase an entire album, now music fans can compartmentalize music purchases to the individual song level with sites like iTunes or Pandora.com
10. Additional Warrantees on Electronics - The typical lifespan of electronics products are 3-5 years. So if you think you will upgrade the item within 5 years, or before you will repair it, is the cost (can be up to 50% of the purchase price) worth it?
11. Late Fees/Overdraft Fees - Paying late fees on credit cards and bills, and overdraft fees on bank accounts can be a disheartening use of one's hard-earned money. Especially when a minimum payment on a credit card of $15 is missed, resulting in a late fee that can be as high as $39 (and perhaps result in an APR% increase). Overdraft fees add up, especially when they are made in quick succession, resulting in fees for each transaction made while an account is overdrawn.
12. Non Bank ATM Fees - ATM Fees can add up. They can also be slightly misleading; it's not unusual for ATM convenience fees to cost $2.00, and for the card-issuing bank to charge up to an additional $2.50 as a non-bank ATM Fee. As a result, it may cost up $4.50 to withdraw $20.00.
13. Gambling - Most people gamble with a vague sense that they may one day strike it rich. Others, play for entertainment. It cannot be denied that - especially at a casino - the odds are stacked against most gamblers. In any case, gambling is often the source of grief and frustration - presumably, at the thought that any money lost could have better been used by depositing it into one's money market account.
14. DVDs - Now there are many alternatives for individuals to watch movies without having to purchase them - Netflix offers unlimited monthly rentals, and websites such as Hulu.com, enable users to watch thousands of its titles for free.
15. Flowers from a Florist - Flowers are often overpriced, especially at florists, and always around the holidays, so your best bet is go to your grocery store, they are often a fraction of the price.

Remember please, everyday spending decisions, especially credit based ones, will do far more harm to your financial future than any investment decision you will likely ever make.

The biggest culprit for many consumers is impulse spending and the convenience effect. Sighting convenience as a main reason, people say it prompts more spending without much forethought and research on whether or not the purchase is a good value, whether or not the purchase is even necessary and whether or not the purchase takes money away from debt payments which may become due and/or eliminates any money being put aside to accumulate.

Improving spending techniques enables most consumers to get a better value for their dollar. One of the easiest steps is to comparison shop before spending. The question when people are out spending should ask themselves "Is the price right?"
Sharpening spending skills and transforming bad money handling habits and practices is relatively easy especially compared to dieting and quitting some other things like nail biting or smoking. It begins with some simple planning. Some folks refer to it as budgeting, a somewhat negative term that implies one has to do without. The ICFE, along with lot of other people, including financial planning professionals prefer to call it a spending-plan. Get yours developed and implemented today or help someone else to the same.

Paul Richard
President - Executive Director
Institute of Consumer Financial Education (ICFE)

ICFE - Institute of Consumer Financial Education - ICFE.info - customer.service@ICFE.info - 619.239.1401