Is it right to use a return policy to get a discount?

In this week's reader mailbag, a look at using a store's return policy to get a discount.

What’s inside? Many readers have written to me asking for me to summarize the questions in the mailbag right at the top so that they know what’s inside. So, I’m going to try this out for this mailbag and see how it goes. Here are summaries of the included questions in five words or less.

1. Ethics of item return strategy
2. Budgeting after debt freedom
3. Lesser pay for more sanity
4. SmartyPig changes
5. Debt counseling and rate changes
6. Getting started on debt repayment
7. Budgeting software needs
8. Life is too difficult
9. 529s and income taxes
10. How to protest BP

Also, many of you have written to me (or Tweeted at me or sent me a note on Facebook) asking about my father’s health. He’s doing fine. He was released from the hospital over the weekend, but he has to have daily treatments at the hospital for a while and will likely have to have some physical therapy on his hand, which is going to drive him crazy because he’s a “hands-on” kind of guy. I think, for the fourth time in his life (at least), he dodged a pretty big medical bullet.

A friend of mine uses a particular strategy to get big discounts on video games. He waits until one of the new releases goes on a big sale at a particular store – like, say, Super Mario Galaxy 2 is on sale for $29.99 at one store but is still $49.99 at the rest – then he buys the discounted new release, takes it to another store with a large selection, and asks at customer service if he can trade this title in for another title. Many stores, seeing the item is completely unopened and that the customer is simply asking to swap it, will simply allow him to do this. He then gets his choice of any of the new releases on sale at this store.

Is this ethical? I’m kind of stuck on this one. If it were a used item, I would find it wrong, but I’m not sure he’s doing anything wrong here.
- Kevin

Buying a game on sale is fine, as is exchanging a sealed game for another one. The issue comes in with the taking of an item from one store to another simply to trade it in.

In essence, this is strongly abusing the return policy of the second store. They have a strong return policy that’s intended to provide greater value to their customers, which is a great thing for customers. The problem comes in when people who aren’t regular customers exploit it. It costs the store because they have to deal with that returned game – even if they “break even” on the cost of the game they brought in and the game they gave out, they’re still in the hole because of the employee time spent dealing with the transactions.

That’s a cost that adds up, and that’s a cost that will eventually be returned to the customers either in terms of higher prices or in terms of worse service.

Your friend is basically exploiting a store’s great return policy. The people that wind up paying for that exploit are the other customers of the store. Make up your own mind whether that’s cool or not.

I am getting ready to switch over to an online checking account with a 3.5 % interest. It will be easy enough to make the 12 debit card transactions a month, just using it for gas for our 2 cars. The linked savings earns 2.5 %, but I wanted to use the checking primarily for my savings account. I track my funds for emergency, vacation, next car, etc. in a notebook, but all of those savings items would go into the high yielding account.

I plan to keep my local bank for the ATM and depositing a few checks I may need to cash in a month, as well as paying the usual bills and doing our usual budget.

I guess my dilema is that we are finally debt free and need to come up with a new budget. 2 major issues:

1. We are contributing 7% of hubby’s income to retirement, and the company matches with 3.5% of their stock. They had is in a fixed rate yielding 1%, which I just switched us out of. Now our choices for the 7% are diversified, not in company stock so we have a broader portfolio. If we put all 7% in their stock, they would give us 7%. I am just not comfortable having all our eggs in one basket. He is 50 this year, and we’ve only had this for a year. With the market instabilities, I’d feel better having any additional savings we do in the 3.5% bank account…. so I guess we need a plan for socking some extra away for retirement.

2. We have lived on a tight budget for 28 years, and since we are finally debt free, I’d like to have a little freedom to go out to dinner or buy something for the house, so we need to come up with a revised budget that lets us enjoy life, but isn’t wasteful. I have a good handle on our fixed monthly expenses, and insurance and taxes, and have started to save for our next car. We have an emergency fund. It’s just the surprise expenses, like birthday parties, broken microwaves and things that come up I don’t know how to plan for. Do I just inch up what’s going into savings, until I get to a good balance, or just leave it in checking, until we have a good amount of excess to transfer? I always keep a $400 cushion in the checking to avoid any risk of overdraft if something comes in earlier than planned.

So these are the issues I wanted to resolve before I switch to the new account, so I don’t accidentally miss getting my interest or submarine my savings by taking too much out with those 12 debit transactions. I just need a plan. (weekly savings now: $60 next car, $50 taxes, $50 insurance for cars and house). Any suggestions?
- Cheryl

With the first concern, the real question I would ask is how long you have to hold the company’s stock after it is issued by that match. If you have to hold it for years or until retirement, then you’re better off diversifying immediately. If you can trade it off immediately, then consider the 7% match, because you can then just trade it in on a diversified investment immediately.

As for the second part of your question, you should have a savings account strictly for such expenses. Transfer some amount into that account each month (or even each week) from your checking account and then when such an “unexpected” but known expense comes up, just take money out of that account (if you need to) to cover it. See if your bank will allow you to have a second savings account, or sign up for an online savings account.

You seem to be spending less than you earn right now, which is good. As long as you keep a reasonable gap between what you spend and what you earn, you should enjoy yourself. Don’t make yourself feel guilty about doing things you enjoy as long as you keep living within your means.

I’m 24 years old and have a steady job working for a bank. For my age, I’m told it’s a great job. 401K plan with great matching percentage, full health care, pre-tax savings accounts and health spending accounts, and they are reimbursing me for 50% of my tuition for me to finish a degree. I’m doing financially well with this job and just finished paying off all my debts, except student loans. I have a small emergency fund, but only about a month’s worth so far. The problem is the job is torture and I am absolutely miserable. With the economy, working for a bank is stressful and I am being yelled at on a daily basis by everyone; customers and management alike. I’d love to quit and work in the animal industry, at a dog daycare or as a dog trainer, but after a thorough search I realize that move would drop me into Financial Doom. The scant positions available are part time and minimum wage with zero benefits, 401k, or anything like what I have now. Even cutting back immensely my budget would be in the red each month and I know I’d be back in debt before I know it. Everyone says I’d be sure to grow in that industry and would be back to making what I am now in 5 or so years, but there’s no way to truly tell and I’m worried I’ll end up penniless and homeless all for trying to follow my dreams. I’m growing more and more miserable at my current job and not sure what to do. Do I take a lesser paying job to make myself happy or try to deal with it until the economy improves and perhaps something will appear?
- Erica

If you’re single and you’re the only person that relies on you, why not go for it?

My suggestion is simple. For the time being, don’t worry about the retirement and the other benefits so much. Quit, get the job that you want to be doing, and live a different lifestyle. Live without all of the stuff you’ve becomed accustomed to. Live in the cheapest housing you can find, possibly with a roommate or two. Get a second hourly job to supplement it, one where you’re not going to be berated by people. Ditch most of your stuff and live instead of accumulating. Make your own meals. Throw your heart and passion into what you want to do.

If you find that it didn’t work out a few years down the road, go back to your old career path and pick it up.

No pile of money is worth anything if it’s making you miserable and dragging you away from what you should be doing in life. That road leads to a wall of material stuff between your heart and your soul.

I think I first read about Smarty Pig from one of your blog writings. Could you please comment either through your blog or to me individually regarding your thoughts on their changing to BBVA compass as it’s bank? I’d like to know your thoughts, and I suspect that other readers TSD would as well.
- Shelley

I think it was the best solution for SmartyPig given where they were stuck. Over the last few years, they were one of the few success stories in the banking world and they (unsurprisingly) outgrew the smaller West Bank. West Bank wanted to remain a small regional bank and as the proportion of their bank that was SmartyPig kept growing, they eventually wanted out of the picture. I think there’s been growing pains for a while, as SmartyPig has been jammed into a shirt far too small for them.

Of course, this happened at a time where the national banking picture (remember 2008, the bank failures, the bailout, etc.) is pretty awful. Most of the really large banks simply aren’t very interested in taking on different projects right now, even if there appears to be growth potential. So SmartyPig found the best available partner.

It’s basically like having a growing child that just hit a growth spurt. You realize that the child’s pants aren’t fitting them any more. You head down to the store, only to find that there are only a few kinds of pants currently available there but there might be more in a few weeks. SmartyPig chose to buy the best pants available to them.

From a customer perspective, I think the eyeballs just need to be on what the SmartyPig service provides. Honestly, the bank behind them doesn’t make that much of a difference. What matters is what SmartyPig does. Are the account terms changing in ways you don’t like? If nothing changes from that end, then keep using SmartyPig (I am). If it does change, then walk.

I am getting serious about debt repayment. I looked closely at the statement for one of my credit cards (I admit, I don’t usually look at them because I just get online, make a payment, and log off.) and I noticed my interest rate was raised a year ago to 24%!!!! I called the company (Bank of America) and asked for an interest rate reduction. They said I didn’t qualify, but they suggested that I call a non-profit debt management organization for assistance. What are your thoughts on doing this?

The other option was to work with them “internally” – the account would be closed, and I would make some kind of repayment arrangements with them at a lower rate. If I went this route, would it negatively affect my credit?

I really want to get out of debt. I am motivated and exploring all options. I never really considered going to a non-profit debt management organization for help, and I never really see this discussed on any of the money blogs I read. Is it better to just go it alone?
- Kay

Non-profit debt management companies usually do exactly what they claim. They help you figure out your debt situation and come up with a plan for repaying it. The problem is that you have to pay them for the service (nonprofit doesn’t mean free).

The real reason most personal finance bloggers (including myself) don’t recommend them is that most of the services they provide are things that pretty much any competent person can do for themselves for free. Trust me, you can set up your own debt repayment plan.

Companies like BoA usually suggest such services because they don’t want to bother with this type of service themselves and they assume that if you can’t handle a credit card then you can’t handle getting control over your own finances. Usually, the issue isn’t knowing how to do it, the issue is learning control over your own impulses, and a nonprofit debt management organization can’t do that, either.

The key step there is up to you either way you go.

I have some friends who are in a difficult situation and they asked me for advice, so I’m wondering your opinion.

The husband and wife are 45 years old. They’ve accumulated $20,000 in credit card debt (avg. interest 17%), have only $18,000 saved for retirement in a 401k for both of them, and live paycheck to paycheck with no emergency fund.

The husband brings in $45,000 before taxes and the wife works part time for $5-10k per year. Including monthly bills and the minimums for their credit cards they are breaking even each month.

My question is, where would you start first to develop a plan for this couple to address those issues (debt, retirement, emergency fund). They would obviously benefit from the wife getting another job and cracking down on spending, but where do they go from there? Any help would be much appreciated.
- Jamie

The best solution, of course, involves more income. Would the wife in this situation consider working more hours? I don’t see any children mentioned, so I’d assume this is possible.

Regardless of the debt, if they’re at age 45 with only $18K saved for retirement, they need to seriously bump up their game. The 401(k) needs to be getting every possible drop of matching money from their employer and they should both have a Roth IRA that’s at least partially funded.

This couple has a history of living beyond their means. If they don’t make the active choice of living well below their income for a while, they’re going to wind up at retirement age with a huge pile of debt and nothing to show for it, and that’s not a fun place to be.

My wife and I have had a budget since we got married. We put together an Excel doc which takes our income (employment for both and self-employment for both) and splits it up according to the percentages we’ve setup. It’s complicated because of taxes being taken out of one (employment) but not the other (self-employment). And don’t forget tithe which we take out before taxes! :) This makes for a very variable income to say the least so it’s not like we can budget the same dollar amounts every month.

From there we have tabs within the Excel doc for each category of spending.

Our question for you is this, is there software available which will:
1) take income from multiple sources (read: pre-tax and post-tax monies);
2) allow us to split it up according our our percentages from within the program;
3) create our own categories of spending;
4) run reports on those categories (ie. food spending from month to month, year to year etc)
5) and lastly, is either free or under $100.

We’ve recently found youneedabudget.com ($60) but it doesn’t allow for #1 and #2 (to our knowledge). We’d have to continue breaking the money apart with Excel and then transfer those into YNAB.
- Jason

The obvious solution here is Quicken. I don’t know of another piece of software that simply does all of this stuff. As you mentioned, YNAB is fairly close as well, but Quicken simply does all of this stuff.

The challenge with Quicken, of course, is that it has a bit of a learning curve, though it does pay rewards if you’re diligent with it. If you go that route, be willing to spend the time to actually learn the software instead of just trying to jam stuff in and complaining that it doesn’t immediately do what you want it to do. Be patient and learn.

Honestly, I still use Excel for most things. It’s just the tool that works best for me.

My life is too difficult and I’m getting exhausted. Starting to wonder if the effort is worth the end results. Can you help set me straight?
- Mel

Usually, people making statements like Mel are either depressed (which means they need to seek a doctor) or they are living a life full of elements that bring them unhappiness that, if removed, would remove that sense of unhappiness.

First of all, what are the “end results” you’re seeking? The end results that are most worth seeking are ones that lead to genuine happiness – usually, they’re personal accomplishments. Very rarely is money alone something that is an “end result” that brings happiness – it often comes about as a result of chasing something that is more of a personal accomplishment that others happen to find value in.

Second, what do you spend your time doing that you hate? Is it your specific career path? If it is, try finding another job. Is it your personal life? If it is, seek out new friendships and different avenues for spending your personal time. Is it your health or personal appearance? Finding new people to associate with helps, as does taking control over your diet and your exercise (which also helps with the feelings of negativity).

Whatever it is that you don’t like in your life, change it. If you feel like you simply can’t change it, then you’re much more likely to be suffering from some form of depression and you should seek medical assistance (and you should start exercising more and eating lots of straight-up vegetables and fruits, too).

I recently opened a 529 college plan (not prepaid) for my grand-daughter. We live in Florida. My question is regarding income taxes. Am I able to deduct the monies I put into the 529 yearly, on my yearly income tax, as I do itemize each year. Thanks for your time.
- June

There is no immediate federal income tax benefit for 529 contributions (though, obviously, there are big benefits when the money in the account is used for educational purposes and the growth within the account is tax deferred). You happen to be living in Florida where there is no state income tax, either.

Many states offer a state income tax benefit for 529 contributors – Iowa is one of those states. Up to a certain cap, contributions to a 529 in those states can be deducted from your state income tax.

You’ve said many times that the best way to protest things you don’t like is with your dollar. Right now, I’m protesting BP by not using BP gas stations, but what else can I do beyond that to affect BP’s business?
- Olivia

Here’s the thing, though. Even if you boycott BP, you’re going to be giving your money to some sort of environmental or human rights violator wherever you buy gas. Plus, you’re not even hurting BP’s bottom line by driving on past a BP gas station because BP is no longer in the direct gasoline sales business – they sold all of their stations to local businesspeople with a stipulation that they had to use the BP name for a certain number of years. The only people you’re hurting are people in the local community.

So how can you vent your rage at BP and the rest of the oil companies? Don’t buy gas. Drive less. When you buy another vehicle, buy one that uses the least possible amount of fossil fuels. Buy an electric car, even.

Go even further and write a handwritten letter to your congressperson and the two senators from your state expressing your outrage at the environmental destruction and ask for legislation not merely to punish BP, but to wean us from fossil fuel use altogether. It’s an environmental issue, a national security issue, and an economic concern all rolled up into one tight package.

On the surface, it seems like the elimination of fossil fuel use would be something that people of all political stripes would be behind. It’s clearly an environmental issue. It’s clearly a national security issue. It’s clearly a trade issue. But why can’t Democrats and Republicans get together on it?

Oil company lobbyists. They’re the real enemy.

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