Things That Will Cost More in 2012

Written by WellHeeled on December 29, 2011 · 9 Comments

I know I am getting old(er) when I start saying things like “I can’t believe I can’t get a pair of wool pants for $25 anymore!” or “I remember when movies were just $5 a ticket!”. New year, new pricing increases, so I found this article: 11 things that will be more expensive in 2012 from Deal News pretty interesting. Can you guess what’s on the list?

The #1 item on the list is airfare – domestic and international. Because of fuel costs and increased regulatory fees, flying is going to become a more expensive proposition for all of us. According to American Express, prices within North American will increase up to 5% for economy and 7% for business class. I’m not surprised, but for someone who loves to fly, this is a big bummer. I probably have spent a few thousand dollars on flying in 2011 – nothing fancy, but traveling on a short notice (ahem business school visits) can really up the fares. I’ve paid as high as $600 for a cross-country round-trip. Won’t lie, that one definitely hurt.

In 2012, I expect to be spending a fair amount on airfare as well. But I’m hoping that with judicious application of co-branded credit cards, I can subsidize my air travel. For example, our honeymoon flight to Buenos Aires is going to be under $500 for the two of us. Quite proud of that one, I am.

The other items on the More Expensive List:

#2 new digital cameras
#3 hard drives
#4 desktop computers
#5 food for home preparation
#6 mobile device data plans
#7 city-enforced fees
#8 water
#9 gas
#10 gold
#11 shipping

To this list, I’d add a few items of my own:

#12 movie tickets – it costs studios more and more money to produce the big-budget blockbusters that are guaranteed to pack theaters, and so ticket prices are sure to climb as well. 3-D movies also add an additional $3-$5 on top of regular movie tickets. Right now it costs $11-$12 for an evening ticket, and the ONLY reason CB and I are still avid movie goers is because we can buy $7.50 tickets from Costco.

#13 clothes – the price of cotton has been going up for a couple of years, in addition, the costs of labor and transportation have also increased. You know these higher costs of production will be absorbed by consumers in the form of higher prices.

#14 tuition – college, graduate school, you name it, and the prices are probably going up. In fact, the Cal State trustees just approved to raise tuition by 9% for 2012. When I look at the Tuition & Costs page of business schools, all the figures have a disclaimer that goes something like this “costs typically increase 3%-5% per year.”

Take a look at the list and let me know what you find most distressing. What would you add?

Categories: Economy, Spending - Tags: retail industry

Are You Financially Insecure?

Written by WellHeeled on December 2, 2011 · 13 Comments

Are you just one job loss, one paycut, and one illness away from catastrophe? Sometimes it seems no matter how much money someone may be able to save or skills they cultivate, it’s a little too easy to fall down the economic ladder. More than 20% of Americans are “economically insecure,” according to the Economic Security Index created by a professor at Yale. The three major criteria for economic insecurity are (1) major income loss (over 25%), (2) out-of-pocket medical expenses, and (3) lack of savings.

Economic insecurity is at a high point, growing from around 17% in 2000 to over 20% in 2008, 2009, and 2010 (source: Economic Security Index).

Unfortunately, twenty- and thirty-somethings are doing the worst compared with all other age groups. The article goes on to say,

Young adults, age 18 to 34, proved to be the most insecure group during the recession, with a rate of nearly 25%. The next most vulnerable folks were those age 45 to 64, with a rate of just under 20%.

How do I guard against financial insecurity? Well, I try to perform well at work, improve my skills, network, network, network, and remain geographically flexible for new opportunities. I maintain a healthcare policy, or at the very least catastrophic health insurance. And I save, save, save, for an emergency fund.

Even though I am not economically insecure right now, I’ve been through a layoff and I get what it feels like to lose most of my income and have to regroup and reinvent myself. I am glad I am in a better place now – making a decent income, healthy, planning for the future with a good dose of optimism.

But those numbers are still disheartening.

Are you financially insecure right now? How are you shoring up your financial security?

Categories: Articles, Economy

Economy Improves More Than Expected – Will Your Spending Habits Change?

Written by WellHeeled on October 28, 2011 · 9 Comments

The economy: better than before

The economy grew at an annual rate of 2.5% for the third quarter of 2011. Not a fanstistic growth rate by any means, but it’s high enough to alleviate fears of a double-dip recession. It’s not as bad as we thought it would be! Hence, cause for optimism… or at least, less pessimism. Given that I’ve spent all of my post-college years in a haze of economic gloom, I’ll take whatever glimmer of hope I can get. From the Los Angeles Times:

“We’re inching our way forward,” said Diane Swonk, chief economist at Mesirow Financial.

The new data from the Commerce Department on Thursday showed slow but steady improvement in the economy throughout 2011. The third-quarter data was in line with economists’ projections.

Consumer spending, particularly on automobiles, helped boost growth. Personal consumption increased at an annual rate of 2.4% in the third quarter, compared with just a 0.7% increase in the second quarter.

Will the improving economy change your buying behavior?

So, with the risk of a second recession abading, will this change your buying behavior? Will you be a little looser with the purse strings? Will you make some big-ticket item purchases that you have put off until now? Will you take out new loans for education or business?

I have to say that the news haven’t changed any of my plans, but it makes me feel much better about taking on debt to go to graduate school. The slowly warming economy probably – and unconciously – make me feel better about picking up a new necklace or a book that I might have passed on before.

Categories: Economy, Spending

Would You Sell Family Gold Jewelry for Cash?

Written by WellHeeled on August 29, 2011 · 29 Comments

The price of gold has grown by leaps and bounds over the past couple of years. In fact, this precious metal is sitting pretty at $1,800 per ounce right now, compared to $1,000 per ounce two years ago and $1,400 per ounce six months ago.

Many folks with old gold jewelry have already cashed out their cache of necklaces, bracelets, and rings. The ever-higher prices are sure to tempt those who haven’t.

My grandmother gave me some pieces before she fell ill – a gold bangle, a few old coins, a chain. She grew up in a wealthy family and these jewels were part of a much larger dowry. During a civil war in her home country, she dumped loads of precious gems into the rivers so that her family wouldn’t be lynched by the mobs. Sometimes, I imagine what treasures must lie at the bottoms of these rivers, covered with decades of mud and silt. These few gold and silver items were all that my ancestors managed to save, all at enormous personal risk.

I am not normally sentimental about jewelry, and her jewelry certainly aren’t really my taste (nor do I have use for such nice pieces). The rational thing to do would be to take advantage of the historic run-up in gold prices, send in the bangle and chain for cash, and then maybe use the money for graduate school. Somehow the rational thing feels like the wrong thing to do. I don’t need the money desperately, and I like the fact that I have something that is a piece of my family’s history. It makes me sad to think of the jewelry, so carefully protected and hidden, melted down. So, for now, I am holding on to everything.

Would you sell, or have you sold, gold jewelry for cash?

Business Insurance Experts Premierline Direct

Categories: Economy, Life, Luxury - Tags: consumer behavior

Countdown to the Shutdown

Written by WellHeeled on April 8, 2011 · 11 Comments

This whole thing is ridiculous. First 1995, now this? Economists disagree on the effects of the shutdown; if the shutdown just last a few days, but it can have catastrophic effects if it drags out to almost 3 weeks, as it did in 1995.

I won’t be directly affected by the shutdown (not to the extent that Federal government employees will be or service workers at national parks will be), but I am sure I will feel the ripple effects. For example, the stock markets hate uncertainty, so my portfolio might take a little hit.

How will a government shutdown affect your work and your personal economy?

Categories: Economy - Tags: crisis, government, government shutdown

5 Lessons From PlaySpent

Written by WellHeeled on March 8, 2011 · 8 Comments

Several weeks ago I blogged about PlaySpent, an online game that gives a taste of life as the working poor. Today, I went back to the site and played again, and I felt compelled to write a little more about the experience. In my previous post about PlaySpent, several of you pointed out the shortcomings of the game (no options to get cheaper housing, no chance to take on another job, etc.). The game is rigged to make you “lose”, I don’t disagree about that, but I think it’s still a worthwhile exercise.

5 Lessons I’ve learned from PlaySpent

1. It is so difficult to build up any types of reserves. Many times I’d run out of money by the middle of the month. Even when I won the game (i.e. had money left over at the end of the money), the money I would have – at most $500 plus – isn’t enough for the rent I’d have to pay at the beginning of the next month.

2. One small money hiccup will cause a big problem. In one scenario, I need to replace a window for $100 after a neighborhood kid smashes it with a baseball. A $100 unexpected expense would be an annoyance in my current budget. But in PlaySpent, when I only had $70 until the next payday, $100 becomes a Very Big Deal.

3. You cannot afford to give your child a head-start or a leg-up. This is probably the most heartbreaking part of the game. My imaginary child gets selected for the gifted program at school, which costs $50. The cheapest thing to do is to decline the opportunity. It is so sad when $50 is too much to give your child a push in the right direction. Or, my imaginary child is falling behind in math, and my choices are to hire a tutor (too expensive), let the kid fail (what?!), or ask a friend for help. In the game I always chose the 3rd option, but how many low-income parents have friends who have the time to tutor their kid for free?

4. You are forced to delay necessary medical treatment. One choice I faced was to pay $400 for a root canal or grin and bear the pain with numbing gel. I chose the numbing gel because $400 would absolutely wipe out my budget for the month (and then some). I seriously think my tooth throbbed as I clicked the second option.

5. In the PlaySpent universe, I was poor. The truly depressing part, however, is that under the rules of the game I will very likely STAY poor. I wasn’t progressing, I had a basic survival job, not a CAREER I was building. Instead, of moving forward, I was barely treading water. There were so many setbacks and very few lucky breaks. It felt like everything served to pull me away from my goal of financial security.

That feeling, even though it was a game (a game!) was eye-opening. I don’t pretend to understand what it’s like to be on the edge of poverty, and I hope I will never experience that. But PlaySpent.org has opened my eyes to how and why it is so darn difficult to get back on your feet when you are so far down.

Categories: Debt, Economy

PlaySpent The Online Game’s Challenge: Can You Survive A Month in Poverty?

Written by WellHeeled on February 10, 2011 · 21 Comments

via UMD

There are millions of Americans out of work and living in poverty today. Can you survive for a month when you only have $1,000 to your name, can only find a low-paying job, and have kids or pets to care for? That is the question asked by the Urban Ministries of Durham, a faith-based organization that provides food, shelter, and clothing to those in need in Durham, North Carolina. In collaboration with the interactive agency McKinney, Urban Ministries came up with this brilliant and thought-provoking online game: SPENT. (Hat tip to Stephanie for tweeting about this game).

PlaySpent.org

—————————————————————————–

What is PlaySpent?

Here are the premises of SPENT from McKinney’s press release:

Your savings are gone. You’ve lost your house. Accept the challenge to see if you can make it through the month on your last $1,000, learning quickly how changes in employment, housing, medical costs and other expenses can create an unexpected shortfall.

Play through a series of difficult challenges that require tough choices about work, where you live and what you can provide your family, seeing all too soon how decisions lead to unimagined consequences. Learn important facts about the condition of homelessness and the many services UMD provides.

Whether you quit or get to the end with no dollars or one, click “Donate to UMD” or “Get involved” and view the many ways players can contribute time and/or money via PayPal. Or play again hoping for a different outcome.

My Experience with PlaySpent

This site takes you through a month of trying to survive on little or no income – with real life obstacles that pop up along the way (Do you go to grandfather’s funeral? Should you send your child to camp? Should you pay your cell phone bill or your car note?). I played this game several times, and I pretty much failed every time. My faults came from always paying the dentist and taking the computer science class that can get me a higher-paying job. Two things that I have regarded as wise investments in my future- health care and education – have become luxuries that I cannot afford in SPENT.

In fact, the first time I tried to apply for the Administrative Temp position, I failed the typing test! Through out different iterations of the game, I had to choose between getting a root canal or suffering more tooth pain. I had to decide if I take $10 that a family friend had given my imaginary child. I had to decide if I want to attend my grandfather’s funeral or skip it. I had to decide if I want to pay my gas bill or my electric bill. This game is nothing if not sobering.

There are a lot of assumptions about poverty and homelessness. I think SPENT does an excellent job of making the experience easier to understand for a broader segment of the population. For too many people, poverty is not a game.

Categories: Debt, Economy

When Homelessness is Imminent

Written by WellHeeled on January 4, 2011 · 13 Comments

thedailytell.com

Most personal finance writing centers around increasing your income or decreasing your expenses. Most assumes that you have a place to live, a permanent address, a mode of transportation, a way to communicate.

But what do you do when homelessness is knocking on your door?

When I read this BlogHer article, How to Prepare for Homeless, what struck me was the matter-of-fact tone that the author, Dorid, adopted to such a difficult topic. It could well be How to Save Money on Food, or How to Look for a New Job, or How to Write a Budget. Except it’s not.

The 15 tips that Dorid listed most dealt with practical considerations (for example, make sure you have a cell phone to keep your means of communication), but she also has words of encouragement for others in the same situation:

15. Remember to pack your self esteem. Being homeless can happen to anyone, especially in this economy. And yes, it’s going to be crushing and painful and stressful and ugly. But if you go into it feeling defeated than you’re beaten, and it’ll be harder to get back up. Remember, you do NOT deserve this, and you’re worth better. Keeping that in mind will help you get through this, and will be invaluable when it comes to negotiating homeless services or acquiring a new home.

Homeless, to put it mildly, is frightening. And the people who are able to stay off the streets (get themselves into a shelter, stay with relatives, stay in a car, etc.) are those with more education, more resources, and better health than the folks who sleep by the side of an alley. Even so, I don’t know how people survive losing a place of their own, a place of security and comfort.

I hope that if I ever fall to homelessness, I can face it with courage and dignity that Dorid seems to. But more than that, I hope I never have to find out how I would act that situation.

Categories: Articles, Economy

The New Abnormal: Pinching Pennies To Justify Splurges

Written by WellHeeled on August 6, 2010 · 12 Comments

A recent Business Week article caught my eye, with the title “Americans Buy IPads While Broke in New Abnormal Economy“, it’s hard not to.

There are many interesting points in this article – the gist of it is that consumers are just sick and tired of making so many adjustments since the start of the recession. Now while we are willing to pinch pennies on the small items, we paradoxically are willing to spend big bucks on true luxury items. Indeed, the fact that we are saving $2 by buying store-brand paper towel instead of a national-brand may help us justify that it’s okay to purchase a new $2,000 computer.

The new abnormal has given rise to a nation of schizophrenic consumers. They splurge on high-end discretionary items and cut back on brand-name toothpaste and shampoo.

Ran Kivetz, a professor of marketing at Columbia Business School, has done research on consumer psychology. He says that consumers’ brains lack a line that separates spending from saving. We practice a certain amount of thrift so that we can justify blowing a large sum frivolously, he says.

Have you fallen into the pinching pennies to justify splurges mindset that Professor Kitvetz talks about?

I know I have. I have proudly patted myself on the back when I took advantage of a 2 for 1 deal and snagged an extra tube of toothpaste for the same price, then the next day, perhaps subconsciously emboldened by my earlier thrift, purchased a Groupon package for a local spa. In order to make my savings goals, I really shouldn’t have made that Groupon purchase. The fact that I saved $3 on toothpaste is nice, sure, ($3 is an In-n-Out burger!), but I would have to have gone through quite a few toothpaste for the $3 saving to add up to a $100 spa visit.

Now I consciously remind myself that my true savings is my income less my expenses (which includes taxes, rent, loans, groceries, and all the other incidentals that comes with living). If I did not spend $10 because I skipped takeout one night but then went and spent $600 on an IPad, I have not saved at all. Instead, I spent $600 whereas I could have spent $610. That’s not to say I shouldn’t get an IPad or that it’s bad to spend – it’s not bad to spend (and in fact it is quite enjoyable, especially if you spend on things that make you happy, which in my case includes food, travel, books, and let’s admit it, clothes).

It IS, however, very important that we don’t subconsciously sabotage our own saving efforts by thinking that we are justified in making certain purchases if we really are not able to afford them.

Categories: Articles, Economy - Tags: consumer behavior

Maternity Leave & Career

Written by WellHeeled on December 3, 2009 · 11 Comments

Most industrialized nations have more generous maternity provisions than the United States does. Consequently, many mothers (and fathers) in the States face a bigger struggle in balancing work and family than in other nations. But could the U.S.’s lack of policy mandating paid maternity leave actually help women’s careers? [Edit: I do not think the study's findings should be held up as proof that the U.S.'s lack of maternity leave is a good thing or as justification for the status quo. However, I find it an interesting study and an additional source for debate in this important issue.]

That’s the theory of a study featured in Britain’s Sunday Times – the study suggests that lengthy maternity leave encourages women to stay in the workforce, but hinders them from reaching top managerial positions.

Magnus Henrekson, one of the authors of the study, said:

When you have high levels of maternity leave, it pays for women to be in the labour market but not aim at a high-flying career. They are derailed from their objectives. The more generous you are, the fewer women you are likely to see at the very top.

According to the study, American women holds the highest percentage of “managerial position” jobs at 42.7%, followed by Australia, another country without paid maternity leave, at 37.1%. British women hold more than 33% of managerial positions. In Sweden, 31.6% of managers are female.

The study explains the reason behind the findings:

…women in Anglo-Saxon countries where maternal leave is less generous climb higher up the career ladder than in Scandinavian nations where years of female-friendly legislation may have inadvertently disadvantaged women.

I find this study fascinating.

If employers were rational actors, and if they perceive that hiring women is riskier because women might go on maternity leave then quit their jobs, then employers would be averse to hiring women, especially for top-level jobs. This would be neither legal nor admirable, but I imagine that it happens. [Charles Wheelan covers the maternity-leave-employer-discrimination topic in his book, Naked Economics: Undressing The Dismal Science].

However, it is wrong to not make reasonable accommodations for mothers, considering the physical trials they go through in bearing children. MaybeMBA writes an exceptional blog peppered with insights on business, elite business schools, and motherhood. She is recent graduate of Chicago Booth, one the top business schools in the world. She is also the mother of a baby and a toddler.

MaybeMBA wrote in a recent post [please read. It is so good],

It is a man’s world. I say this without ill will – it has historically made sense to be so. But making it a human being’s world requires more than just adding women to the mix and expecting men and childless women to understand the practical reality of birthing and bearing babies. …the only important difference between men and women is babies. All the other alleged differences are trivial. The baby factor affects all women, even if they never have children, as it weeds women out of the public realm. Accommodating women and their wayward uteruses (uteri?) is not about entering a new touchy feely world or lowering the bar, it’s about finding clever ways to overcome the inescapable physical burden of motherhood.

On a sociological tangent that I won’t get into – I find it interesting that fatherhood has much lighter impact on a man’s career [I would argue that based on outside perception, fatherhood does not harm a man's career, and may even enhance it].

I’ve read that biggest disparity in pay is not so much between men and women, per se. It is not between parents and non-parents. It is not between childfree men and fathers. It is a disparity that exists between childfree women and mothers.

However, because a majority of women are mothers and almost all young to middle-aged women can become mothers, policies and attitudes towards working mothers and motherhood can most definitely impact attitudes towards all working women.

Categories: Articles, Economy, Life

Freedom Fund – It Gives Me Freedom (or, How I Really Feel)

Written by WellHeeled on September 30, 2009 · 12 Comments

A long-timer commenter, Onegirl, asked some insightful questions on my previous post. I imagine other readers might have similar questions, so I wanted to offer my thoughts on the subject.

It seems that all of your posts lately have been talking about spending money or remaining on a budget. Are you sad you don’t have a job? Are you trying to remain positive for your readers? I’m sure some days you are feeling bad or sad, but I’m not really getting that vibe. Do you not want to share that with us? Just curious. How is your freedom fund coming along? Is unemployment enough to keep you happy for now? Are your parents helping you especially since you just moved into the cool new place?

Everyone deals with not having a job differently. Here’s how I chose to respond to my situation: I gave myself 3 days of “free-for-all”: sleep in until noon, mope around if I wish, watch TV online, eat whatever I want. Then, the free-for-all is over. I’m not going to feel so bad or anxious that I impede myself from the next goal, the next opportunity.

Financially, I am not worried about the next 9 months (I sincerely hope my job search doesn’t extend that long – I’m working on a few opportunities that I hope will bear fruit before then. One involves living overseas). Unemployment benefits cover all of my day-to-day expenses, and I have cash savings that will go quite a ways, especially if I move back home. My parents treat me to dim sum more often, but other than that they don’t give me any money (although knowing that I have their support is invaluable).

I said before that the uncertainty is unnerving, but the possibilities are exciting. I stand by that. Don’t get me wrong, I don’t want to be rah-rah earning no income is great - I want to be progressing in my career and making money. But here’s where having a Freedom Fund is so wonderful – it allows me the opportunity to conduct my job search aggressively, not desperately (I don’t write about interviews because they fall into the no-blog-about-work policy). If I need to travel to hold informational or formal interviews, I can afford the gas or the plane ticket. If I want to take advantage of my free time by taking classes that will be personally and professionally enriching, I can do so. It gives me peace of mind.

So, do I feel bad or sad sometimes? Yes, I have my moments. But they are just that - moments. They don’t overwhelm me nor stop me from doing what I need to do. Do I want a job? Of course. Am I enjoying the chance to do things that I haven’t had time to do before (travel, dance lessons, etc.)? Well… yes. Does having a Freedom Fund, being young, and having the emotional support of my parents make me feel eager and ready to embrace what might come tomorrow? Heck yes. I’m determined to take advantage of this time the best I can so that when I look back on it, I can say, wow, I really did something cool, and not, wow, I had all that time and did nothing.

Categories: Economy, Life - Tags: job search, twentysomething

Unemployed or In-Between Jobs? 4 Ways to Keep Moving and Grooving

Written by WellHeeled on September 8, 2009 · 10 Comments

As I enter my 3rd week of “in-between opportunities,” here’s what I’ve realized: the freedom to construct your own schedule means the responsibility to construct your own schedule.

Without a job to keep me at my desk for 10+ hours a day, it’s easy while away a whole day watching YouTube and chatting with friends (not that I have done it or anything…). But time is precious, and I don’t want this time to pass by without having anything to show for it.

If you are a young adult who is in-between jobs right now, like I am, there are blessings to be found! You probably don’t have any big obligations like a mortgage or college tuition for kids. You’re geographically flexible. You now have the opportunity to do amazing things that will be more difficult to do later on in life:

1. Freelance Projects / Internships: I’ve been working on a couple of freelance projects (hopefully I can share more information soon). Through these projects, I will develop another set of skills, expand my network, bring in a little bit of income, and set visible goals to work towards (not having any obligations gets boring after a while). The people I’ve been in contact with are really smart and seem good to work with, and I’m excited to be partnering with them. And it’s interesting work.

I am a big proponent of freelance projects and internships. Everything that you do during this time to further develop your abilities and contacts can only help you later on. A friend of mine took an internship at a online media company and did so well that they offered him a full-time job. So now he has a new career path (that he enjoys much more than his old one) and a repertoire of new skills, thanks to that internship.

2. Hobbies / Personal Goals: Have you ever said, I wish I had the time to do XYZ? This can be anything that you’ve wanted to do – run a marathon, volunteer on a political campaign, cook a 6-course meal, write a book – now’s the time to do it, with no more excuses.

My biggest hobby right now is Argentine Tango (and salsa, though salsa is a flirtation while tango has my heart). I’ve been dancing up a storm – taking 2-3 classes a week. I can tell that my frame is stronger, my following ability is more responsive, my posture more correct. I’m still light-years away from becoming a tanguera, but getting there is half the fun, no?

3. Languages: The ability to speak and read a second (or third, or fourth) language is an enriching skill both professionally and personally.Why not take this opportunity to brush up on your foreign language skills or start learning a new language? If you don’t have money to hire a private tutor, you can enroll in community college classes or arrange a language exchange (see Craigslist).

During the next few months, I plan on concentrating on business Chinese Mandarin to prepare myself for the possibility of pursuing opportunities in China in the future. I already have a background in the language, so that helps. But I want to go from “Dinner was really nice. My favorite dish was the Kung Pao Chicken.” (conversational) to “My experience in business analysis and strategic review will help your company in its expansion efforts.” (professional).

4. Travel: Where do you want to go? What’s stopping you? I know so many people who’ve traveled extensively during their time off. This is when you can truly take advantage of mid-week airfare / hotel specials or be able to take off months to go travel the world. I have a friend who is doing a self-constructed Scuba World Tour. You can bet that will be much more memorable than spending 6 months sleeping in and staying up late.

Where do I want to go? Too many places to count! Austin, D.C., New York, China, Argentina, Galapagos, etc. etc. I’ll try to knock several of those off my list.

The worst thing to do is to sit around and do nothing. So go do something already. If you’re in-between jobs and doing something cool, share in the comments!

Categories: Argentine Tango, Economy, Life, Travel - Tags: how to, job search, learning another language, lessons & hobbies

Interesting Facts About Off-Price Retailers (i.e. TJ Maxx, Marshalls, etc.)

Written by WellHeeled on September 3, 2009 · 17 Comments

TJ Maxx Event

This morning I had the pleasure of going to a TJ Maxx event held for bloggers (thanks to @happysquid), where we went on a “behind-the-scenes” tour and listened to Allison Deyette, a fashion consultant, talk about latest trends for the fall.

(below: the backroom where 10,000 pieces are processed every week)

Ring-a-ding: What I Got

I received a $50 gift card at the event, which I used to buy a pearl and silver filigree ring for $25. This ring caught my eye because I’ve been wanting to get a cocktail ring that’s noticeable but understated. Many other stores carried pretty rings, but they were either too dainty or too bling-y or flashy (or, you know, too expensive). I love pearls, and I like the slightly vintage look of this ring. It’s apparently handmade in Israal by a company called Sea-Noy.

TJ Maxx had such a wonderful jewelry section, I haven’t expected that. I’ll have to go back sometime to use what’s leftover on my gift card.

Interesting Facts About Off-Price Retailers

Most of the bloggers there came from the beauty / fashion space, which was obvious, because they were all very stylishly dressed. As I was representing the personal finance space, I figured I could be forgiven for wearing something a bit less edgy. The fashion talks were very interesting – according to Allison, a feminine purple blouse is THE accessory to have for Fall. But what I found more interesting were the little tidbits about sourcing and buying in the off-price world:

TJ Maxx buyers travel 40 weeks out of the year to speak to vendors all over the world.
Off-price retailers engage in “opportunistic” buying, i.e. when forecasting mistakes, canceled orders, or overproduction result in more items that a full-priced retailer can buy, an off-price will come in and buy the merchandise at vastly discounted prices.
Most of the merchandise at off-price retailers are in-season, and are released at the same time as full-priced merchandise at department stores. (i.e., you can find a dress at Nordstroms and the same dress at TJ Maxx in the same week.)
Off-price retailers have a fast turnaround time of as short as 2-3 weeks from the time a shipment is ordered to the time that the products are delivered, processed, and shown on the floor.
Department stores have the option of shipping back merchandise they don’t sell, but off-price retailers’ purchases are final.

My Thoughts

I imagine designers are of two minds on off-price retailers. On the one hand, excess inventory can be moved quickly and there is no danger of returns = (less) money in the bank. Cha-ching! On the other hand, having pieces at such discounted prices do hurt the brand image and readjusts consumer expectations (another reason why designers are now resisting the firesale prices of late 2008 and early 2009).

On my imaginary third hand, the brand image issue may be mitigated because upscale department stores offer more than just a dress or a pair of shoes – it offers the experience of walking into a beautiful store, with great lighting, tasteful displays, and more consistent product offerings. When you purchase a dress from Bloomingdales or an upscale boutique, you’re not just buying the dress. You’re buying an experience.

In this economy, however, I think cold, hard price considerations will outweigh most experiential buying preferences. The retail space as a whole has been badly hit by the recession, but off-price retailers such as TJ Maxx, Marshalls, Ross, and Loehmanns will do better than other retailers through this time.

My Thoughts As A Consumer

Great merchandise for 50%+ off? Sounds great to me.

Categories: Economy, Shopping - Tags: marketing and business observations, retail industry

Possibilities and Uncertainties

Written by WellHeeled on August 31, 2009 · 24 Comments

A lot has happened in the past couple of weeks. The biggest piece of news is that I’ve joined the ranks of the unemployed. This situation is a mixed blessing – on the one hand, having no income is of course a scary experience. On the other hand, this development will give me more time to explore other ventures.

My feelings can best be summed up as “the possibilities are exciting, the uncertainty is unnerving.” I appreciated the experience at my job, but in many ways, the timing worked out and this was just the push I needed. I am really excited about pursuing other opportunities.

In the first week of unemployment, I’ve applied for UI (still waiting on the paperwork), taken 3 dance classes, cooked a nice sit-down dinner for two, revised my resume, attended an industry event, and planned a trip to New York City (informational interview + friend visit) for September. I’ve also caught up on several loads of laundry, learned to perfectly poach an egg, made cupcakes and frosting, and mastered a complex turn in salsa. Another goal is to do a Couch to 5K program before the end of the year.

During the past week, I’ve also reached out to some people that I’ve met through the blog. These people, who have started off being strangers (but whom now I consider my mentors) have generously taken hours of their time to advise me on career opportunities and review my resume. I am deeply grateful to them.

So as I look down the road to the next 6 months, I’ve feeling little apprehensive, but I’m also invigorated by the sense of possibility. I want to make sure that I take advantage of this period of time in my life – I have more time now, so there’s no excuse not to follow up on some things that I’ve always wanted to do. And on the personal finance front – yes, am I ever glad that I’ve been saving all along.

Categories: Economy, Life - Tags: job search

Profits & Markups in the Fashion Industry (or, Did Banana Republic Make Money Off My $20 Dress?)

Written by WellHeeled on August 22, 2009 · 6 Comments

Given the proliferation of recession sales lately, I’ve been wondering about its effects on retailers, specifically women’s apparel. I recently purchased a linen dress from Banana Republic. It’s MSRP (manufacturer suggested retail price) is $98, but after several discounts, I purchased the dress for $20. So, how much of a markup did Banana Republic still receive? Did the retailer still make a profit off that dress?

According to my research, the clearest and most straightforward explanation on profit margins / markups in the fashion industry came from the Toronto Fashion Incubator website.

What are the profit margins in the fashion industry? What is the mark up for retail?

Susan Langdon (executive director of Toronto Fashion Incubator) says:

The basic costing formula for ready-to-wear apparel is this:

a) total of all raw materials (fabric, notions, cutting, sewing cost i.e.labour, label, ) x 2 = wholesale price

b) wholesale price x 2 = suggested retail price**

**You always need to provide the suggested retail price because this gives all of your retailers the same opportunity to sell the goods at the same price. It puts all of your customers on a fair playing field so that no one undercuts another.

The above basic formula is called “keystone” pricing and it’s suitable for selling in domestic markets. It builds in a basic profit margin of 100% from raw material cost to wholesale and again from wholesale to retail.

If you find that the suggested retail is higher than you would like it to be, you’ll have to reduce your raw material costs somehow by finding less expensive fabric or streamlining your production methods.

If you wish, you can also choose to increase the profit margin to be more than 100% between raw material cost to wholesale (not between wholesale to retail) so that it covers additional expenses like retailer discounts, sales rep commissions etc., but be careful not to price yourself out of the market. Look at where your competition is priced (both the high and low ranges) and try to remain around that.

Taking my $98 MSRP dress as an example:

The wholesale price will be 50%, or rounded to $50. To get down to the raw materials price, will be 50% of $50, or $25. Following the “keystone” pricing model discussed above, the price of the dress should be $25. But, since Banana Republic is part of the largest U.S. specialty apparel company by revenue (the Gap, Inc.) and have most of its clothing made overseas, I would assume the comapny was able to purchase the dress for much less than $25. This is because of (a) the volume discounting the Gap receives from manufacturers and (b) cheaper cost of labor and raw materials (although there will additional shipping costs).

As of the quarter ended in March 2009, Gap Inc’s shows a gross profit margin ( gross profit divided by total revenue) of almost 40%. Assuming a 40% profit margin and $20 sales price, Banana Republic made less than $8 in profit. That means the the cost of the dress to Banana Republic is around $12. (Banana Republic probably made less than 40% profit on this sale. This is because on full-priced sales, the company must be making much more than a 40% profit margin. Discounts are a way of life for mid-tier retailers, and would’ve been taken into account in company’s strategy and forecasting).

The cost of labor and raw materials of the dress is one factor, but taking into account the rent for stores, employee costs, advertising to broadcast sales, general and administrative costs, etc. etc., and the cost of that dress may have very well been close to $20.

So, did Banana Republic make money off the $20 dress?

I don’t know. Working on limited information and broad generalizations, I can only offer a vague answer: I think if Banana Republic did make a profit off the $20 dress, it must’ve not made a healthy profit margin. Sales with 80% discounts will work short-term to move excess inventory, but such drastic discounting is not sustainable nor viable as as long-term strategy.

Fortunately for Banana Republic, most consumers have purchased the dress at higher prices ($98 MSRP, $75 first discount, $50 second discount, $35 third discount), which means higher profits for the retailer. I picked up my dress during the final sale.

I love shoes and clothes, but the intersection of fashion and finance is almost more fascinating! If any readers work in the industry, please share your insights in the comments!

Categories: Articles, Economy, Shopping - Tags: marketing and business observations, retail industry

Recession reflections

Written by WellHeeled on July 12, 2009 · 7 Comments

Even in (or because of?) this recession, I find that among twentysomethings I know, most are less willing to trade adventure / soul-searching for security.

Example 1: 25-year-old who quits job with decent pay to travel the world in search of the Next Big Wave.
Example 2: 23-year-old who uses layoff from the Big 4 to figure out how to break into acting / entertainment business.
Example 3: 27-yeard old quits consulting gig to start a start-up. Went from $100K+ paycheck to ramen noodles – but, he’s living his dream.
Example 4: Several quarterlifers living the funemployment life.

In all of these cases, these are high-achieving people in college who went after the big jobs during recruiting. In most cases, having worked for a year or two or three, they have saved up enough to fund their traveling costs or start-up expenses. Self-discovery is a lifelong process, but these twentysomethings are getting a jump start on their roaring twenties.

Money can shackle you or liberate you. It’s gratifying to see them out there, pursuing their dreams and trying to figure out what makes them happy and what gives their lives meaning.

Life’s too short not to.

Categories: Economy, Life

Monday musings on employment, unemployment, and the such

Written by WellHeeled on June 8, 2009 · 8 Comments

Recently, it seems as if a new word has entered the recession-inspired lexicon. First we had “staycation,” then came “frugalistas” and “recessionistas.” Now, there’s “funemployment”. Los Angeles Times and SF Weekly both published features on the trend (and I have several friends who are taking time off to do their own thing).

So while all the dismal jobs news makes me feel anxious about my career future, these reports help me feel like, well, the world wouldn’t end if one does not have a job for a little while.

Out of college, everyone (or so it seemed) wanted to “take over the world.” But this deep retrenchment may have given people – especially young, well-educated professionals in their 20s and 30s, a chance to reexamine their ambitions, priorities, and assumptions.

I wonder – if this dismal market has given people the chance to do something differently, chase their dreams instead of the next promotion. Having experienced or witnessed the massive disruptions to our identities as producers and consumers, how will we respond once the recession ends?

One 20something blogger I read is Molly of These Little Moments (who shares my penchant for shoes). She has been unemployed for 6 months after being laid off from her job in public relations. Today, she wrote a very honest post about her experience with unemployment, and how this stint outside the workforce has changed her view towards work and altered her career ambitions.

This recession has affected my thinking too – maybe not as drastically as it has Molly, but it definitely has on several fronts.

The recession has reminded many people – myself included – that family and friends are the most important things in life. My thinking has always been that true love and friendship are hard to find. So once you do you better hold on to them for dear life! I think for me, a rich and fulfilling life can be lived out in both the personal and professional spheres. This recession has reaffirmed in me the importance of financial independence, and my desire to have a career, not a job.

One alumna sticks out in my mind – she worked at several large companies domestically and internationally, graduated from a top business school, and now is in charge of marketing an entire brand in Europe. She’s maybe 35. She’s going to be a CMO or an EVP one day (maybe even a CEO), I can almost bet on it.

I’m impatient, and sometimes, on a bad day, it feels like I’m already falling behind. But I know I can get there.

Categories: Economy, Life, Work

The Coffee Wars: McDonald’s McCafe vs. Starbucks

Written by WellHeeled on May 27, 2009 · 18 Comments

McDonald’s and Starbucks are two of the most successful and iconic consumer brands in the world. In recent weeks, I’ve received several new coupons for McDonald’s new McCafe lattes and mochas through it’s big marketing push for the new drinks. Starbucks (who has been struggling lately after years of out-performance) must be concerned about its new-found competition.

I came upon this piece on Pierce Mattie PR‘s website (note: I am not affiliated with them in any respect), and thought they asked an interesting question:

Will this new campaign help McDonald’s become the coffee brand of choice?

Here’s what I think:

McCafe will not replace Starbucks. The consumers who are seeking the ambiance and the customization that Starbucks offers will not flock en mass to McCafes. McDonald’s, to me, appears “transactional.” People pull up to the drive-through and get a Big Mac and a diet coke, or stop by before work to grab a new latte. Despite the happy characterization of Mickey D’s commercials, few people I know would suggest that as a spot for an after-date drink or a catch-up session with girlfriends.

Starbucks, on the other hand, focuses on the “experiential”. At its best, the coffee giant truly represents the “third space” between home and work where a customer can chat with the barista, order a drink to his specification, then settle in for conversation, socializing, and relaxation. Before he leaves the store, he might pick up a CD or a Starbucks coffee mug

If McDonald’s can woo the consumers who go to Starbucks four times a week and convince them to frequent McCafe twice instead, it will have achieved great success. These consumers are likely to be more interested in a transactional experience even at Starbucks (i.e. the quick morning coffee vs. the drawn-out coffee date or after-work snack).

McDonald’s chose a very opportune moment to push the McCafe concept – in the recession all consumers are looking for a better value-proposition, and McDonalds seeks to deliver that with a lower (than specialty coffee) price point but a higher (than perceived McDonald’s coffee) quality. Before the recession, an office worker may have bought a $4 frappacino before her morning meeting. Now, with a tighter budget, she may instead grab a $2 McCafe latte.

I’m not sure if the McCafe concept as a stand-alone store will catch on – I’ve visited a McCafe, and while the space is nicer and more “coffeehouse-like” than a regular McDonald’s, it’s still a far cry from the styling and the comfort of a Starbucks. I’m very excited to hear that McCafe will be coming out with new drinks over the upcoming months. More coffee drinks are always good in my book!

What do you think? What are your experiences with McCafe drinks, and would you forgo Starbucks for McCafe instead?

Categories: Blogging, Economy, Luxury - Tags: consumer behavior, Featured, marketing and business observations