Tuesday, March 10, 2009

Use Product Life Cycles To Save Money

What you know about the market matters, if you want to save money on the things you buy. This is certainly the case with product life cycles. Understand them, and know where in the cycle a product is, and you get to pay a lot less.

Fortunately, the life cycle of most things sold is predictable. A product is born, it is popularized, and then it is commonly distributed. With common distribution comes lower prices. We have all seen this is recent years with DVD players, futon couches, MP3 players and more.

The trick to taking advantage of this knowledge to save money then, is simply to wait if you can. Once a product reaches its "mature" phase (common distribution), it is often less than half of what it cost originally. In fact, the quality and functionality of a $59 DVD player from Wal-Mart may be better now than the $600 ones were originally - and that;s a 90% drop in price.

More good news! Life cycles seem to be getting shorter, so you won't have to wait as long as in the past to get those low prices. Many new electronic products cost half as much a year after they come out. It may be tempting to be among the "trendsetters" that buy everything when it first comes out, but half off means that for a little waiting you can afford to buy twice as many things.

To save the most money, of course, you try to guess when the bottom has been reached on prices. A good indicator is when most people who want a product have it. At this point manufacturing costs have probably hit their low and competition is at its greatest.

For the absolute cheapest price, wait until it is a mature product and a new version is being introduced. The old version often gets really cheap as it is cleared out. While its true that you may need the new version for functionality with some products, with others the change is more one of style. If a new style of running shoe comes along, for example, the existing one may get really cheap, even though it does essentially the same thing.

Secret Codes For Pricing Cycles

Retailers sometimes have their own pricing codes that can be deciphered. A "price hacker," tries to break the codes and determine where things are in the pricing cycle. For example, some price hackers claim that when a price ends in "8" ($3.88, $7.28) at Target stores, the product price is beginning its descent, and when it ends in "4" it is as low as it will go.

Watch for clues to these codes, and you might figure them out, but if the store you are in doesn't use such price codes, you'll be doing a lot of investigating for nothing. A simpler way to determine what the prices mean? Ask a friendly employee, who may be happy to show off his or her insider-knowledge. In any case, learning to identify and talk to friendly employees may be one of the better ways to save money.

Two Money Mistakes - Are You Making Them?

We all make money mistakes from time to time. Much of the time, we are vaguely aware that we are making a mistake, or it is even obviously an error the moment we make it. But the science of behavioral economics is showing just how subtle these things can be. Are you making either of the following money mistakes?

Money Mistake - Mental Accounting

A term used by researchers in the field of behavioral economics, mental accounting refers to how we treat money from different sources differently. For example, if you work hard to save $2,000, you might be very careful in how you spend it, while a $2,000 tax refund - which seems like a lottery win - might be treated as less important. Of course, the amount is the same, and you are free to use it any way you choose, but a "windfall" is typically treated differently from earned income.

I used to see extreme examples of this when I dealt blackjack in a casino years ago. Most players had a mental category they called "house money." This was the profit that they had made, or at least the amount that they were ahead at the time. A man might be very cautious betting with his "own" $200 bankroll, but once he had $600 of winnings in front of him, he would start betting more and playing with less caution. "I'm playing with "house money" he would announce.

Of course, the reality is that once he won the money in the first place, it was all his money. He was free to walk out that door and do anything he wanted with the $600 profit. In fact, he would might stop before he ever lost $600 of "his own" money, but this was somehow different. The result was predictable. If some common sense prevailed, he might lose only $500 of it, and still leave with more than he started with. More often, he would lose the $600 AND the $200 he brought.

You might think that this is not a problem you have. But what if you won $1,000 on a lottery ticket, or got a $1,000 bonus from your employer. You could take your windfall and put it into your retirement account or your child's college fund. But do you really treat such money the same as if you worked weekends to make an extra thousand? This is an easy money mistake to make.

Money Mistake - Integrating Losses

This is another tough one to avoid. When you buy that new car, do you suddenly feel like an extra $300 for a better car stereo isn't much money? Of course, it doesn't seem like much when you are spending $22,000 for a car - and that's why that salesman will push these things. But if it isn't too much, why did it seem like a lot to buy such a stereo for your previous car. Just the day before you might have thought $200 was too much.

This is about the psychology of making large purchases or taking large losses. This is another classic habit you see in gamblers. $100 was too much to lose at the start of the night, but once he is suckered into losing $2,000, it seems easier to throw that last $100 out there all at once. This is not a phenomenon limited to gamblers or new car buyers, however.

Suppose you are having a new house built. The builder gets you all excited about the latest refrigerator, which he can include for only $3,000 extra. The day before, that same refrigerator might have been worth just $1,800 maximum to you. In fact, you might buy one for just $1,500 if you wait until you move into the home. But when you are spending (or borrowing) $300,000 to have a home built, $3,000 just doesn't seem so outrageous.

You have to mentally step outside of the situation for a moment to avoid making this money mistake. Ask yourself if the proposed expenditure is one you would have felt good with a week ago. Ask what other options you have. Finally, just wait. A month later - after a large purchase - you might be in a more rational state of mind to decide what something is worth to you.

The Insurance Contract

You have decided that you need life insurance. You have a mortgage that you want to be sure is covered if you should pass away before it is paid off. You don’t want the outstanding debt to become your spouse’s responsibility. You go online and get quotes from multiple companies. You look at the different rates and coverage options that the companies provide. You are pretty sure which product you will go with. But do you really know all the details of buying an insurance policy?

So what is an insurance policy? Simply put it is a contract. It is a contract that a policy holder pays for called a premium. What takes place is an agreement that for the price paid an insurance company will assume the possibility of an unknown loss. This could not take place without a contract, the policy. The risk is transferred from the individual to the insurance company. Risk is the chance or uncertainty of loss.

The insurance policy is a legal contract. As long as there is insurable interest, when a loss occurs the policy owner has their financial loss restored. There is no profit to be gained. One is merely made whole again.

A lot of the time people will put much time and energy upfront thinking about whether or not they need life insurance or any insurance, for that matter. Do I have a need to actually spend the money monthly or annually on a policy? Someone might ask this. Then they may spend ample time on the phone or the computer with an insurance agent. Or they may use one of the very useful and free resources on the internet and get free quotes and do a comparison of premiums. After doing all of this there is getting the policy issued. This may entail underwriting, which in most cases, necessitates a medical exam. Then finally getting the policy issued. After all of these steps are complete and all of that time and energy has been exerted, the policy is mailed to your home. At this point so many people never really read their contract. They just put it in a file drawer and never take it out again.

But what are the things that went into making this contract? Well for an insurance policy it has to have four components. All contracts commonly have a competent party, a legal objective, an offer & acceptance and valuable consideration. Did you know that policy that is sitting in a drawer somewhere collecting dust had these items that make it up? What are these things, though? Well, a legal objective is where the contract insures there is pure risk and insurable interest involved. Offer and acceptance is when one party, the applicant, “offers” to fill out an application and paying a premium, and the acceptance is when the insurance company accepts the risk by issuing the policy. Finally another feature is the term valuable consideration. That is when items of value are exchanged. For example, the insurance applicant provides information on the insurance application and pays a premium and in return the insurance company promises to pay for losses that occur under the policy.

These are the parts that went into making your insurance policy that may be snug in a drawer somewhere in your house. Now you know what components went into making that contract.

Saving Money on Your Power Bill

Electricity – it’s a necessity. But are we taking it for granted? We waste so much electricity without even knowing, which in turn wastes hard-earned cash. So what can you do to change your electricity-wasting ways and save cash, fast?

Well first you need to think about something called ‘Vampire Power’. This is power that is used to keep your electrical appliances on ‘standby’. Appliances on stand-by add over $100 to your electricity bill and produce around 85kgs of CO2 per year. So as you can see, this Vampire power just sucks the money right out of your wallet.

There are two categories of appliances that use Vampire power around your house:

1.The first is devices with a standby function.
Whenever you can use a remote turn something on – it’s using standby power. This function can use up to 40% of an electrical device's total power consumption – and just think – how long do you keep your TV/DVD player/Playstation/Wii/Stereo on standby for every day?

2.The second is transformers.
These appliances transform electricity from AC to DC. The problem when it comes to energy consumption is that most of them are pretty cheaply made and continue to use electricity - even when the appliance they're providing power for is turned off.

For example – if a cell phone is completely charged, the transformer/charger is still using electricity. If it’s warm when the device is off, it's using vampire power.

So here are a few tips to keep your power bill down:

1. Turn off appliances at the wall switch

2. When purchasing a new electrical appliance, look for the energy star label to gauge its energy consumption rate.

3. Keep your dryer clean – it increases the efficiency of the machine which means it uses less power to do a better job. And it decreases the fire risk as well!

4. Do loads of washing in the dryer consecutively so you can make us of the heat that is already built up.

5. Use an extractor fan to keep your kitchen cool. It’ll keep your house cooler, and the savings in the cost of cooling your house will by far outweigh the cost running the fan.

6. Close doors to rooms that you are not using when heating or cooling your house.

7. Turn off your computer – this appliance is a real power-waster, so turn it off when you’re not using it.

8. Use power-saver bulbs such as compact fluorescent bulbs. These use 75% less energy than standard light bulbs.

9. Every now and then – vacuum or dust the metal compressor coils on the back of your fridge. Like your dryer – it will increase the efficiency of the appliance and it will therefore run using less power.

10. Use gas heaters instead of electric heaters – these heaters use significantly less power.

These are just some of the ways in which you can save yourself from stress when the power bill arrives, not to mention a significant amount of payday cash. And what’s even better, is you’ll also be doing your bit for the environment by reducing your annual carbon emissions.

It might be worth checking out recommended online providers for fast cash loans if you do find yourself in a payday pickle. It’s a better source of credit than a personal loan where your debt may be dragged out for months, sometimes even years. It’s best to look for a credit source that suits your needs, expecially when you just need a small amount of money for a short period of time.

With some online cash loan companies in Australia, you can get from $100 - $600 within 60 minutes of approval. Some credit providers even offer instant cash 24 hours a day, seven days a week (yep, even on public holidays!) just like a credit card but without the hassle of ongoing fees.

Secured Or Unsecured Loans - Which Is Your Choice?

The two most well-known types of loan are an unsecured loan and a secured loan. These are two very different ways of obtaining credit, the big difference between the two is the rate of interest you will be charged. Unsecured loans typically have a higher rate of interest than secured loans.

The definition of a secured loan is that you borrow money against collateral, i.e. something of value, usually, your home. With an unsecured loan the lender has no security if you fail to make the payments; this is why the interest rate will be higher.

Now more than ever there are large numbers of lenders competing for borrowers. This places the public in a good position to negotiate for lower interest rates and better terms.

There are obviously pros and cons to secured as opposed unsecured loans, a secured loan will be much cheaper each month than unsecured loan. But on the other hand, if you fail to make the payments it is possible that you could lose your home.

An unsecured loan does not require that you risk your house, but on the other hand you will pay more interest and therefore bigger monthly payments. Secured loans are probably best avoided when you need relatively small amounts of money, it does not seem very practical to risk the roof over your head for a small loan.

Well within living memory, unsecured loans where the territory of very dubious lenders and organised crime. Trading standards and other government authorities have now managed to remove 99% of these dubious lenders. But care should still be taken when dealing with companies offering unsecured loans.

It is important to approach a quality broker, to help you in finding the right loan company to deal with your case. These days, many of these loan officers are located online as well, as in traditional offices.

With the removal of these criminal lenders the unsecured loan market has moved into mainstream business, with many large household name companies willing to make unsecured loans available to the public.

Secured loans, for many generations, were the exclusive world of banks and building societies. But over the last 20 years many new lenders have come into the market, offering a wider choice and more competition, which has resulted in a better deal for the borrower.

Many of these ‘new’ lenders are not actually new; they are large foreign companies that have moved into the UK market from their home countries in the EEC, America and even as far afield as Asia.

For example, well known 'British' high-street bank HSBC, is in actual fact "The Hongkong and Shanghai Banking Corporation". The Hong Kong and Shanghai Banking Corporation, who are probably the largest finance and banking company in the world.

Borrowing secured and unsecured loans from companies that may not be familiar to you, but are world renowned financial institutions is now an everyday event. With so much competition it is essential that you get the best advice possible in order to obtain the best deal you can on a secured or an unsecured loan.

It is not practical to search out the best deal on your own. Professional advice is certainly the best way to secure a deal that will benefit you in terms of the amount you pay in interest and your monthly cash payments. So take advantage of a broker and his services it is sure to benefit you in the long term.