What I’m doing to protect myself after the Target data breach

As you’ve probably heard, Target had a bad month. Between the days of 27 November and 15 December, about 40 million credit card numbers were stolen, making it one of the biggest breaches of its kind in history. As far as we know, the card number and security code were stolen, but debit-card PINs and addresses were not.

Target says they have contained the breach and are cooperating with credit card companies and authorities. Cringely has some analysis, but it has more for people like me to think about how we do things at work than it does for consumers.

And, well, as luck would have it, I shopped a lot at Target between the days in question. And I used both my credit and debit card during that time. Here’s what I’m doing, some of which may be counter-intuitive.

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My Zinio adventures

My Classic Toy Trains subscription lapsed. I decided I wanted to subscribe to the digital edition and see if I liked the paper reduction enough to live with the DRM restrictions. I can always switch back to paper next year, right?

So I went to Zinio.com and tried to subscribe, and had nothing but problems getting them to take my money.

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Nickel and dime your way to prosperity

An old friend and I have been talking a lot about debt elimination these past few weeks. With any luck, both of us will be completely debt-free by age 45 at the very most, and probably sooner.

The trick is to dump as much money as possible into debt retirement. As recently as November, the interest on my Honda Civic was costing me $1.40 a day. Think what you could do with that $540 a year you’re paying in needless interest.

The challenge is finding the money to use to retire debt.Some of these tricks will only save you a few cents. You must get yourself over the it’s-only-25-cents mentality. That quarter can either work for you or against you. A quarter paid at the beginning of a 30-year mortgage saves you more than a dollar by the end of the loan. Can you find a safer way to quadruple your money? I doubt it.

If and when you have no debt, dump those pennies, nickels, dimes, and quarters into an index fund. An index fund just buys you the same stocks that are in the Dow Jones Industrial Average, or some other index. Historically, these funds double in value every seven years. Great Depression, Schmeat Schmepression. Dump a quarter into an index fund and don’t touch the investment, and in 28 years, it’s $4.

So let’s find some creative ways to get some quarters.

1. Pay your bills online. This potentially does more than save you the 37 cents in postage. My gas and electric companies both have arrangements with checkfree.com to allow online payments free of charge. I was invariably late in paying them, which subjected me to interest payments. The other nice thing about Checkfree is that it schedules the payment for the due date. So if by chance you have an interest-bearing checking account, that money can work for you until the last possible day. You probably won’t save more than a couple of bucks a month this way, but that’s $25 over the course of a year. If someone offered you $25 without any strings attached, I doubt you’d turn it down.

2. Make car and mortgage payments as soon as possible. I may be showing my ignorance here, but interest paid to me on most accounts I’ve had is calculated monthly. Interest on my car is calculated daily. So, making that payment as soon as my paycheck shows up in my checking account reduces the principle, thus reducing my interest payments by a few pennies a few days early. It’s only pennies? I’d rather they be my pennies than Honda’s.

3. Use credit wisely. I remember one day a few years ago, I was at the grocery store and instead of pulling out my debit card, I pulled out a credit card accidentally. I thought how awful it would be to have to pay for life’s necessities on credit.

But if you’re disciplined, and you have a credit card with rewards–and we should be talking cash here, not merchandise–then it makes sense to pay for life’s necessities on credit. Take a look at my Discover Card bill, and you’ll see the bulk of it is things like gasoline, groceries, my telephone bill, and $20 trips to Kmart, which means I was probably buying stuff like toothpaste and deodorant and other household necessities. I pay the balance in full every month, so the result is essentially some bank paying me to buy the things I’d need to buy anyway. This nets me about $80 a year. I never see a dime of it–I apply it directly to the card’s balance.

4. Buy a programmable thermostat. The cheapest programmable thermostats cost about $30. They can easily save you that much in a month. During my 8-hour workday, my thermostat only heats the house to 56 degrees in the winter time. It cools it to 82 in the summer. During waking hours and on weekends, it keeps the house at 70 degrees in the winter and 75 in the summer. During sleeping hours the temperature raises or lowers by 5 degrees depending on whether it’s summer or winter. I used to have $300 heating bills in the winter months. Now I have $175 bills. That’s still ridiculous, but it leaves me money to actually do something about it.

5. Cut out the sodas and snacks. I used to routinely spend $1.50-$2.00 a day at the vending machine and the cafeteria at work, buying coffee, soda, and snacks. Over a 240-workday year, well, do the math. The 34.5-ounce can of coffee in my fridge (it lasts longer when stored there) is marked 9-26, the date I bought it. I expect it will last me until the end of the month. So that can of coffee will last me five months. I buy the off brand, so I can sometimes get one of those cans for between $3 and $3.50. So my morning coffee costs me 2.3 cents. I quit drinking soda entirely and I pack a granola bar in my lunch. Over the course of the past year I am sure I’ve saved $300.

6. Pack your lunch. Lunch at a sit-down restaurant almost always costs you $7. Fast food usually costs at least $5. The cafeteria at work is usually $3-$4. Sometimes I pack leftovers that would otherwise get thrown away, so they’re essentially free. It’s fairly easy to pack a lunch for $2. Again, do the math over 240 days. Do you want to spend a house payment on lunch every year, or do you want to spend a car payment instead?

7. Eat out less. A couple of years ago I was dating a girl who had to eat out 3-4 times a week, at least. Usually it was places where I was lucky to get out for under $20. I always paid, of course. I couldn’t figure out why I didn’t have any money. But with a little creativity, it’s entirely possible to make dinner for two for $4. You can make a fairly impressive dinner for two for $10.

8. Shop the cheap stores. St. Louis has five different chains of grocery stores. At the top of the ladder is Dierbergs, followed by Schnucks. A third local chain, Shop ‘n’ Save, generally beats the Schnucks and Dierbergs prices by a few percent. But now I do most of my shopping at two stores that white-collar professionals rarely visit: Aldi and Save-a-Lot. In most cases the quality of the product is the same. But when I can get a loaf of bread for $.99 versus $1.59, the difference adds up quickly. For the things Aldi and Save-a-Lot don’t carry, I still go to Dierbergs, but I rarely spend more than $10 at Dierbergs now, unless they’re running a big sale on something.

8. Buy generics. A lot of people are afraid of generic products because they feel they might be getting ripped off. You’re actually a lot more likely to get taken with a costlier brand name. I’ve found the quality of most generics to be as good as the name brands. When it isn’t, I try a different generic the next time. Eventually I’ll find a generic that’s as good as the big name brand, and save a bundle. I’ll buy the name brands when they’re on sale, but aside from that, my pantry is full of generics and I don’t care who knows about it.

9. Don’t spend a dollar to get 14 cents. A common excuse for not paying down your house is that the interest is tax deductible. That may be, but you’re getting pennies on the dollar. My car payment was costing me $1.40 a day until I paid it way down.

It’s tax time. That means you have a piece of paper that tells you exactly how much interest you paid on your house last year. Are you paying $14 a day to inhabit a house you supposedly own? That tax deduction only reduces the net cost to $12. I can think of better things to do with $12, and I’ll bet you can too.

10. Don’t spend your windfall all at once. Are you getting a tax refund? Did you get a bonus? Have you been working a lot of overtime lately? It’s OK to reward yourself and/or your family. But don’t blow all of it indulging yourself. Spend 10 percent of it, tithe 10 percent of it, and use the rest to retire debt, and dream of the day when you have no mortgage payment and no car payment and every paycheck is a windfall.

11. Save your pennies. Coinstar, the makers of those change-converting machines in grocery stores, says the average household has $90 in loose change scattered about the house. A fairly painless way to save money is to dump your change into a jar at the end of the day, rather than spending it on frivolous things. At some point, convert the money into a more usable form, then apply the windfall rule to it.

12. Cascade your debt. I pay extra on my car every month. When the car is paid off, I’m going to start adding that amount to my mortgage payment every month, except in case of emergency. I estimate I can have my house paid off in about five years by doing this.

13. What will I have to show for this purchase? This is key. Before you spend even a quarter, consider what you will have to show for it by buying it. Just because you walk past a candy store in the mall doesn’t mean you have to go in and buy something. If you’re lucky, all it’ll do is rot your teeth and make you fat. You could have paid that quarter into your mortgage and turned it into a dollar.

Some purchases are unavoidable. In a couple of months, I’m going to need new tires. I can think of a million things I’d rather do with that money, but I need it. That’s OK. I’ll have it.

The trick isn’t to live in total self-denial, but to exercise restraint. Most of us live like millionaires, but the problem is that we’re spending our million dollars instead of letting it work hard so we don’t have to work as much. And it’s killing us.

Good things come to those who drag their feet

A month ago, I was looking to buy a fridge and a washer and a dryer. My family came in to help me.
Mostly I got frustrated. I went into Sears and liked their prices, and the salesperson offered six months’ free financing. But you never buy the first place you look. We went to a Maytag dealer. The salesperson was extremely nice and helpful and offered me a year of free financing, but the prices were high. I had checked Best Buy a few days before. Pricing was comparable to Sears, and they offered their standard six-month free financing, but I could save a little at Sears by buying Kenmore, which was being made by Whirlpool last month.

I decided that for the price difference, I could go to Sears and pay off the appliances in half the time. So we went back. The salesperson who had helped me was gone. I told another salesperson I’d need financing. He offered me rates that were comparable to a typical exploitative rent-to-own joint. “It’s just 1.9 percent a month,” he said.

A 22.8 percent APR? In this day and age? With my credit rating? You’ve got to be kidding me. I might as well just put it on the Discover card I already have and avoid having yet another credit check done. Or watch the mail for a card with a really low introductory rate, for that matter. I told the guy that earlier in the day I could have gotten free financing. He said that must have been a mistake. I told him I wasn’t interested and left him with a half-filled-out ticket.

By then I wasn’t in the mood to go spend four figures on a bunch of stuff and have to deal with delivery arrangements. So I went home and took a nap. I closed on the house. I started moving. The appliances task sat. And sat.

A week ago, I mentioned to some friends that I still needed to go buy my big appliances.

“Gas or electric dryer?” one of my friends asked.

“Gas,” I said.

“You want one?” she asked.

“You’re trying to get rid of one?” I asked.

“It came with my house. It’s not very old but I had a set that was less than a year old, so I wanted mine. So it’s just sitting in my basement. Yours,” she said.

Nice. That saved me at least 300 bucks. Good things come to those who drag their feet.

So last night I went into Best Bait-n-Switch to try my luck. I couldn’t remember if the dryer she was giving me was a Whirlpool or a Frigidaire. A lot of people want a matching set, but I don’t care much about that. Look at my stereo: My receiver is a JVC and my CD changer is a Sony. And nobody’s going to look at my washer and dryer.

The salesman said he saw fewer returns on Whirlpools and that Whirlpool customer service was easier to deal with. Pricing was comparable. Unfortunately, you never know with this place whether he was being sincere or whether Whirlpool was running some kind of incentive to move inventory. I remember in my retail days it seemed like there was a promotion with some vendor or another every month. I still remember my manager sitting us down at a meeting one day. “IBMs are the best. I don’t know why,” she said. “Make up something. They’re running a promotion this month.”

I’d spotted a $379 Frigidaire washer on the Web. Whirlpool didn’t have a direct equivalent, but there was a $399 Whirlpool that had better features. And then there was a $459 Maytag, discounted to $429, that had more features still. And it was a Maytag. Maybe I should have stuck to my guns and bought the Frigidaire. But I bought the Maytag.

Then I went and looked at refrigerators. He started me out in the $699 aisle. But the fridge in my first apartment was a bottom-end model that didn’t even work right. The fridge in my current apartment is a bottom-end GE that does work. I could buy the same thing for 350 bucks and be content with it, if not happy. Mom’s been trying to talk me into an icemaker. So I told the guy I wanted a fridge that had an icemaker, or could have one added.

There was a $399 Frigidaire that fit the bill. Very basic. But it was everything I needed, really. I glanced over at the fridges next to it. There was a $499 model that had nicer shelves, a third drawer, and all the drawers were clear. I liked it better. I’ll like having clear drawers. I have this nasty habit of buying produce, putting it in a drawer, and then forgetting I bought it. A couple of months later, I remember. So clear drawers will save me some big money over the life of the fridge.

There was a $459 model that had a third drawer but didn’t have the nice shelves. And then there was a $429 model. It had the nice shelves and clear drawers (three of them) and everything else I wanted. I couldn’t understand why it was priced lower. The salesman didn’t know why it was priced lower. I bought it.

I skipped the extended warranties. Ask the salespeople about the warranty terms sometime and then ask the customer service people. You’ll get different stories from them. I learned that the hard way about 10 years ago. A lot of it is discretionary. Why should you pay $100 per appliance to get to go to different stores and talk to different people until you get what you want? It’s better to pay a little extra to get equipment that’s less likely to need service in the first place, which is what I did in the case of the washer. Losing a fridge is a bigger deal, but I also know it isn’t all that common.

Then I asked about financing. He said 12 months, interest-free. Nice. I’ll take it. I filled out the application, got everything in order, and then I got the bait-and-switch, in the form of the magical words “unadvertised special.” How about 18 months of interest-free financing?

Dude.

Good things come to those who drag their feet.

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