The $20 Trap

A couple months ago, I was driving my parents’ car on an almost-empty gas tank, and decided to fill up. I had only taken the car out for a five-minute drive, so I figured I would be doing my parents a favor. I rarely drive, so I didn’t know how much it would cost, but figured it would be around $20. No problem—I could do my parents a good turn, and I wouldn’t even notice the money missing in my bank account. 

But as the price ticked up toward $30, I started to feel differently. While $20 feels like nothing, $30 feels like something.  

I realized that I’ve started spending $20 here and there as if it won’t make a dent in my finances. After I get my paycheck, I’ll make a few sub-$20 purchases that I was waiting on. Individually, they seem small, as if I’m barely spending money at all. But put them together, and I can easily spend $100 in a few days.

None of these purchases are  extravagant; I might buy a book, or a Pilates class, or a couple yoga blocks for my physical therapy exercises, or a few pairs of socks, or some tupperware, or a bottle of wine. But, of course, they add up.

Now, I’m trying to retrain myself, so that every purchase feels like something. It helps that we’re tracking our spending again (more on that later).  When you keep track of everything you buy, you are forced to think about everything you buy, even if it only costs $3. It’s a really great tool for getting control over your money.

At what price do you start to feel like you’re spending real money?

Could we live on $2,000 a month?

It’s a question that has been discussed recently in the personal finance blogosphere: could you live on $1,000 a month? (Or, for two people, $2,000 a month?) A couple bloggers (I Pick Up Pennies and Fabulously Broke in the City) answered YES. For me, the short answer, for which I barely even have to do any math, is no. I couldn’t even pay my rent and my student loan bill with $1,000 a month. But it raised the question: How little could I live on? Could we, between the two of us, live on $3,000 per month? Here’s what it would look like:

Rent: $1690
Student loan: $400
Cell phones: $130 (assuming we couldn’t break our contracts)
Electricity: $75 (higher in summer)
Internet: $50
Groceries: $500
Laundry: $60
Transportation: $120 (subway fare)
TOTAL: $3065

Here’s are some things I wouldn’t be able to buy: 

Dry cleaning
Hair cuts
Medical/dental
Any meals out
Home goods
Clothing
Netflix
Newspaper subscriptions
Charitable donations 
Gym/exercise
Wedding gifts

Am I leaving anything out? Are there any necessary expenses I’m forgetting, which should be included in our $3,000 budget? Are there any other things I’d have to give up?

The Palm Pre Reviewed

For the last seven days, I’ve been testing the Palm Pre, and today, sadly, I must send it back. It’s the first smartphone that’s seen as a true competitor to the iPhone, and it deserves all the accolades it has received. I generally don’t think of myself as a person who gets attached to gadgets because of their design. I scoff at tech reviews that gush over a laptop’s beauty or form factor. But I must say, I became very attached to the Pre,and I think design is a major reason why. It is small enough that the iPhone seems almost bulky in comparison. Plus, it feels more durable than the iPhone, less fragile. I’m afraid I’d break an iPhone within two weeks, while the Pre feels as solid as a regular phone.

And of course, there’s the fact that the Pre can multitask. I had as many as eight programs open at once on the Pre; the iPhone, by contrast, canrun only one at a time. The Pre can also combine your work and personal calendars, so you can look at them both at once, and it does the same for your contacts. Overall, it’s quite a nice operating system; check out my video demo to see how it works. 

There is one flaw. As you can see in the video, the keyboard is very small.  It was a bit uncomfortable for me, and I wish Palm had included the option of a touchscreen keyboard. But for those business users who hate touchscreens—but still want a decent smartphone—the Pre’s physical keyboard will come as a relief. 

Then there’s the price. Sprint’s Everything Data 450 Minute plan costs only $69.99 a month, and includes unlimited data and text messaging, plus GPS navigation—so you can get rid of that standalone GPS device. With AT&T, the plans also start at $69.99, but you have to pay $20 more for unlimited text messaging, or $5 for 200 text messages a month. And it’s unclear what the iPhone’s new TomTom GPS app will cost. 

READ THE FULL REVIEW AND WATCH THE VIDEO HERE.

(The full review was posted on my professional blog, to which I give precedence.)

The Best Netbook For $400 or Less

I recently received the following email:

I want to buy a netbook for $400 or less. Any advice?
—M.C.

The netbook category is changing so rapidly, it’s sometimes hard to keep up. But it seems that the best value for your money right now is probably the Asus Eee PC 1000HE. It’s an editor’s choice at PC Magazine and a favorite at Laptop Magazine, which called it “one of the best values in netbooks around.” It offers over seven hours of battery life (compared with less than five hours on average for netbooks), weighs 3.2 pounds, and sports a 92-percent keyboard that makes some crucial improvements over previous versions. (Notably, the shift key is now right under the enter key, a placement that’s more important than you might think.) The 1000HE is currently available at Amazon for $383.

Personally, I would avoid the Eee PC 1008HA, also known as the seashell, which is a little thinner and prettier than the HE but has 1.5 hours less battery life. Style is relative; even the best-looking netbooks look a bit like children’s toys. However, I know M. sometimes prefers style over substance, so I’ll leave that decision up to him. Another good choice is Samsung’s highly-regarded N110, which also has over 7 hours of battery life and a great keyboard; it costs roughly $410 at Amazon.

What if you want to go cheaper? Read the rest of my recommendations here. (The full post is on my professional blog, to which I give precedence.)

The Best Cash Back Credit Cards

It’s not easy to compare different credit cards—banks go out of their way to obscure key details, and most comparison websites are difficult to navigate. So I decided to test out BillShrink, the new website that tries to find you the best deal on gas, credit cards, and cell phone plans, based on your preferences and usage habits. It allows you to search for cards based on your spending habits, the kind of rewards you want, and your credit rating. The article is posted on my other blog; Read through it for the full BillShrink review, or simply skim through for the bolded names of credit cards that offer solid cash-back returns.