andydidyk.com

Merry Christmas and Happy New Year!

The following is a guest post about something that I think will be on everyone’s mind as we begin a new year: saving money.  Trisha Wagner has outlined some very direct and easy-to-follow tips for making the most out of your budget in 2010.  Now if only I can get her to author a post on saving time so that I can blog more often…that’s next on my list.

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How you manage your personal finances plays a crucial role in your short and long term financial security.  Every person is different and faces unique challenges based on their own financial situation.  There are however three problematic areas that many people agree can lead to financial disaster.  They include; having too much debt, too little savings and not enough money (income) to remedy either situation.  For people struggling with limited resources, eliminating debt and building savings can add a lot of stress to an already difficult situation.  Fortunately saving money does not have to be a stressful endeavor.  Here are a few tips that can take the stress out of saving money.

• Make it automatic-  It is a proven fact that when people have to physically manage their cash, there is a tendency to spend money on unnecessary purchases.  If you have trouble getting your money into your savings account eliminate the temptation of spending that money elsewhere by having it automatically deposited into your savings account.  Determine how much money you can comfortably afford to deposit each pay and have that amount transferred from your paycheck to your savings each pay period.  Most people are surprised how easy it is to forget about that money when they don’t “see” it each pay.
• Saving to save-  Many people claim they simply do not have enough money to sacrifice even a small portion to savings.  In most cases there are areas in your life where you spend money unconsciously.  Track your spending for a minimum of one week, preferably one month to see where you are losing money on unnecessary purchases.  Consider services, memberships and subscriptions that you currently have to determine if that money could be put to better use elsewhere.  Unless you are facing a true financial hardship you can likely come up with a decent amount of cash to contribute to your savings by simply not wasting it in other areas of your life.
• Budget savings-  The benefits of having a budget have been well documented yet many consumers still do not have a household budget in place.  Every dollar should have a job and it is your responsibility to assign where your money will be spent.  By including your savings in your budget you automatically know where that money is going and will be less likely to find other uses for that cash.
• Have realistic goals-  Due to the recession individuals may find themselves having trouble balancing all of their financial obligations.  If it is unrealistic for you to contribute the recommended 10% of your earnings to savings then find a number that works for your situation.  The key is realizing that every little bit adds up and even small contributions made on a regular basis will help build savings that can be used in an emergency or toward other financial goals.

Saving money in the current economic climate may be a difficult task for individuals facing tough times, however it is necessary to ensure financial security.  By building a cushion of “extra” money you actually reduce the stress of living paycheck to paycheck.  In addition to having back up money for emergencies you also put yourself in a position to invest future savings for long term growth.  Use these tips to take the stress out of saving money and save yourself the real stress of living without savings.

Trisha Wagner is a freelance writer for DepositAccounts.com, where you can compare rates of checking accounts from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and savings accounts.

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photo credit: voobie
http://www.flickr.com/photos/vinish/ / CC BY-SA 2.0

Toys ‘R Us: from kids’ playground to kids’ prison with a single promotion.

Saddening.  Sickening.  Soul-swallowing.

Three phrases that describe the end of summer, and the most dreaded of all phrases in a young person’s life: back to school.

This is a truth universal, as sure to come as the changing of the seasons.  It’s been embedded in our nation’s ethos since the industrial revolution and ensuing urbanization led to the closure of the one-room schoolhouses and the end to (most) home schooling.  And now, in a desperate play to gain market share in a weak economy, the place where kids “don’t want to grow up” suddenly transformed into another Target wanna-be (and not in a good way).  What’s next?  Despite it’s optimistically named signage, Toys ‘R Us’ “Back 2 Cool” program makes a paltry swipe at the lucrative back-to-school market and ultimately weakens the Toys ‘R Us brand.

I can just imagine the nightmarish scenario for thousands of kids across the country, their eyes sparkling with promise and wonder as they roll up into the Toys ‘R Us parking lot, anticipating the delights within.  When suddenly, the bottom of their world drops out and they realize what their Mommy or Daddy really brought them in for: pencil boxes, washable markers, and #2 pencils.

Toys ‘R Us selling school supplies is as ridiculous to me as the Mercedes-Benz minivan [full disclosure: I own a Honda Odyssey].  The best thing a brand can do is to become more narrow instead of broad (unless you happen to be a Wal-Mart), to further define a portfolio of products and services by who the company really is.  One thing about a company that has an imbalance favoring growth is that the brand gets ignored and trampled as top management seeks to drive up stock prices and profits.  Doing so for Toys ‘R Us means clearing out a huge area of floor space and adding school supplies to try to capture a few more dollars, instead of offering a consistently fun and unique shopping experience.  A place where kids “don’t want to grow up” should be filled with fun and toys that they simply can’t get anywhere else.   Calling a jumble of cardboard bins filled with cheap imported school supplies doesn’t exactly seem to fit the bill.  “Back 2 Cool” it most certainly is not.

UTOPIAN Coffee Co. founders Patrick Smith (left) and Brendon Maxwell.

I’ve been writing a lot about social media lately, and I decided to have some Q&A time with a good friend that is actually using it to help power his business.  Patrick Smith is the co-founder of UTOPIAN Coffee Co., and an overall great guy.  He and business partner Brendon Maxwell (insert obligatory cheap coffee aside here) employ no full-time social media guru or consultant, and are bootstrapping most aspects of their business.  Social media presents a key marketing opportunity, and like most small business owners, it’s an avenue that they must navigate on their own.

As the coffee expert so astutely articulates, the very basics of product marketing (start with a genuinely good product) and relationships (be nice to people and they will be nice in return) are the foundations that are propelling UTOPIAN Coffee Co. forward. That and lots of caffeine.

The following is our exchange about social channels, the coffee business, and the ethics of underage coffee consumption.

Tell the readers a bit about your business.  What do you sell?  How are you selling it?
UTOPIAN Coffee Co. is a web-based quality-oriented specialty coffee micro-roaster.  That’s the official answer.  What does that mean to the average Joe/Jane?  We are uber-picky about the green/raw coffees we buy, meticulous in roasting, and we bag and ship straight out of the roaster.  This way the coffee arrives on your doorstep (anywhere in the contiguous 48) within 4 days of roasting.  Crazy fresh.

At a time when McDonald’s is undercutting more expensive coffee brands such as Starbucks, Seattle’s Best, etc., with the McCaffe versions, why do you believe your more upscale, niche product will be successful?
Great question, Andy.  I’ll answer anecdotally then more substantively.

When I was in college, I drank lots of coffee.  Knowing this, a buddy of mine bought me a freshly-roasted pound of Sumatra as a gift.  I noticed immediately that this was far superior to anything I’d ever had.  The curse came when poor, tuition-drained Patrick tried to revert to Chock-Full-o-Nuts.  NO WAY.  I literally skipped meals to ensure that from that point forward I would have good coffee around.

Driving through a coffee shop (or McDonald’s) on your way to work will cost you $2 to $5 each day five days a week.  That’s a monthly habit of $40 – $100 for 20 cups of coffee.  If you were on a myUTOPIA membership receiving 2 pounds a month you would save between $7 – $67, and it would yield 80 cups of coffee!  You’d have more money, more time, better coffee, less stress, heck I bet you’d even live longer!

On the objective end, Google Analytics allows us to simply track the sources of our traffic.  Additionally, any coupon codes we generate are always specific to the outlet through which they are disseminated.  This allows us to carefully track the effectiveness of any such campaign.

People are using social media for everything….obtaining news updates, getting shopping leads, and let’s not leave out socializing.  It leads to a smaller world, but also a smaller attention span.  In order to successfully utilize these channels, we need to remain specific, concise, and relevant.

Any plans to enter the brick and mortar retail market?
Not if I can help it!  The hours are rough, overhead is higher, & managing hourly employees is difficult.

What are the things that social channels can’t help a small business with?
Product quality.  It is one of the pillars of our business.  Social media can help with marketing, and if you’re really clever distribution, but never product quality.

Who should quit their day job and start their own business?
Anyone with a good, somehow original idea, the expertise to make it a reality, a high stress threshold, low sleep requirement, good marriage (or none at all), strong work ethic, optimistic outlook, and billionaire parents.

What advice do you have for closet tea drinkers like myself?
Switch to coffee.  It doesn’t stain your teeth as badly and is more readily accessible stateside.  No, honestly, I don’t know a load about tea.  Give some serious thought to the science of extraction when you’re tooling around with tea. You might have some fun results.  Play with variables like water purity (RO or tap), water temp, contact time, and agitation.

I know you have small children.  How early do you plan on letting them have their first cup of Utopian Coffee?
Been there. Done that. Calvin is almost a year.  He’s not super keen on coffee.

Hudson is 2 and a half.  He loves coffee.  If you ask him his favorite kind, he responds “mytopian.”  He apparently thinks that the first syllable of the word “UTOPIAN” is the pronoun “you” and than “-topian” is a separate word.  Naturally since he is referring to himself and not to you, he calls it “mytopian coffee.”  I have a photo somewhere with Hudson at 2 years old with a crema mustache from having a sip of my espresso.

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Thanks Patrick, and if you ever get a hold of some high quality imported teas, I’ll be first in line.

You can follow UTOPIAN Coffee Co. on Twitter at: http://twitter.com/UTOPIANcoffee

A few days ago, I added Google Adsense advertisting to what I hope is an unobtrusive are inoffensive area of my site.  I was curious – could I make any real money by blogging?  Would the ads be relevant to my readers?  Would anyone care?

These questions put me face-to-face with the ethical dilemma I’ve been having as of late: is it unethical to block ads?

Like over 47% of the online community (as of April 2009), I use Firefox as my default web browser.   And like over 50 million other people, I use Adblock Plus and a set of filters to block out 99% of the advertisements on sites I visit.

It started out innocently enough: many years ago, I was surfing the web on a 56K modem and the ads were simply eating up too much bandwidth (especially on sites like weather.com and cnn.com, where the ads are numerous and the actual content is slim), so I installed AdBlock with Firefox, and POOF all the ads were history.

Fast forward to 2009, where broadband penetration is north of 25% for the US, and I suspect that number to be tripled or higher for content creators.  So bandwith isn’t a big deal.  True, the ads are mostly annoyances, but the ad revenue is at least theoretically what compensates the producers of content and frees those people from having to hold down another job just to put good stuff online.

So here’s the moral contract I’ve made with myself.  For blogs, news sites, Hulu, and other services that I use regularly and derive value from, I will selectively disable Adblock Plus for the entire site.  It’s the way capitalism and American consumerism works at its best – voting with our (or really the advertiser’s) money as to what content is valuable and useful to the individual.  This costs me nothing, but I believe that it will make me a better citizen of the internet.

Conversely, I will selectively block individual ads that I find to be offensive, overly obtrusive, or stupid.  Yes, that’s highly subjective, but so am I when I’m choosing what to read or consume.

As with yesterday’s example, I shouldn’t expect something for nothing.  What do you think?

(update: Budget Surplus as a Percentage of GDP, 1965-2009 – image credit – www.powerlineblog.com, and thanks for the link, Pete!)

I’ve been doing a bit more reading lately than writing. I think that has to do with trying to wrap my head around these tumultuous economic times, and the best way for me to do that is to read and discuss. Here are a few places that I’ve been spending my time lately, and my own take on the recession:

Blogs to read:

Blogs are great because they are free, personal, and you can talk back to whoever wrote them. Here are three of my favorites:

1. Get Rich Slowly – This is an oft-referenced and well-researched personal finance blog. With the economic climate being what it is, I’m always looking for another angle on saving money and better managing my finances. Believe it or not, sound micro-economic principles often translate well into the macro-economic world of my clients. Another good reason to stay up with the times.

2. My Money Blog – Another great personal finance blog. Here, the author shares (to the penny!) every detail of his financial picture. Investments, debt, mortgage rates, etc. Of course, it’s a bit voyeuristic, but also extremely informative. Here in America we’re generally very secretive about our personal finance, and therefore we rarely, if ever, have the opportunity to learn from one another’s financial experience. I’m not about to publish my net worth online, but I’m glad this blog does. It’s also full of great, realistic tips for saving money and for making money on the side.

3. I Will Teach You to Be Rich – This is Ramit Sethi’s blog about personal finance. At times he can be a bit brash or even egotistical, but the financial advice he offers is very sound, and many people can benefit from such advice as, “Shut up about your money unless you’ve taken the time to read a book about how money really works”, even though it might fall more kindly on folks’ ears if it were rephrased. Overall, great stuff.

A few reasons why we’ve had this recession coming to us:

One of the recurruing themes I’ve seen in everything I’m reading is the basic assertion that things are going to get worse before they get better, and that Americans have had this recession and market correction coming for a long time.

According to the U.S. Bureau of Economic Analysis, consumer spending makes up roughly 70% of America’s GDP, and according to the NY Times, the average household credit card debt (this doesn’t include houses, cars, college loans, etc.) was over $8500, and collectively Americans owe $2.56 trillion on credit cards alone. All this, while the savings rate has plummeted from 8% of income in the 1960’s to less than half a percent today. Simply put, this trend is completely unsustainable, regardless of your polictical views or whomever you’d like to point the finger at.

Sadly, the recession will undoubtedly hurt many people, because as consumer spending drops (people tend to hold on to their money when they are scared they might lose their jobs), companies will suffer and have to let people go. Those people who have been laid off then cease, save for necessities, being consumers. Thus the companies suffer further and either let more people go or collapse completely. There is a very real reason that our fine elected officials on Capitol Hill are scrambling around to pass the “bailout bill”.

What the government wants you to do:

1. Ignore the gnawing feeling in the pit of your stomach that the economy isn’t doing well. The official label for this is “poor consumer confidence,” and it drives the stock market down into the toilet because people want to pull their money out in anticipation of a collapse. Also, if you are afraid of losing your money you will spend less. Which brings us to #2.

2. Spend more money. Spend it like you did back in 1999, or even 2004. Buy frivolous things, and big things, like cars, boats, and houses. This will have the effect of “stimulating” the economy, will increase the “consumer confidence” of your friends and neighbors, and

3. Get sick. Going to the doctor will help to bolster a critical sector of our economy and its hyper-inflated fees. If possible, get sick long enough to go to the hospital but not long enough to file for unemployment or disability.

4. Save less. Money sitting in the bank might be good because it gives banks the cash needed to make loans (see #2), but seriously, if consumer confidence is high enough, banks will find a way to lend to everyone anyway.

What you actually should do:

1. Admit that, in fact, things are bad. That’s okay to admit, because it’s true and the resulting fear, anguish, anger, or frustration can help motivate you to make the changes necessary to survive.

2. Spend much less money and save more. The fact is, you could lose your job, and the stimulus package that Congress just passed, if it works, won’t do so in the immediate future. That means you need to have cash reserves set aside to be able to ride out things for awhile – 6-8 months or more. With the costs of everything going up, you can only save money by cutting back on your present expenses or by earning more.

3. Don’t get sick. Take steps to exercise and stay healthy. This will help you avoid costly trips to the doctor, make you feel better (it may even increase your confidence, in a good way). Also, taking sick days means you are not at work, which means someone else might be getting a leg up on you in your absence. Plus, if you do lose your job and your health insurance, you’ll be in a much better position to stay strong and out of life-ruining debt.

4. Give stuff away. As I pointed out earlier, owning things really just means that you have to spend time taking care of things. There’s definitely a point of diminishing return for everyone, so take a moment and figure out what that might be for you. Plus, if you give things away you’ll be helping someone else out, and according to some research, that’s the only way to truly stay happy anyway. Charities are really struggling right now, and giving generously helps to put your life into perspective, a perspective that will become more and more necessary to weather the coming storm.

"The more money we come across, the more problems we see" - B.I.G.

As a person who likes to write about consumerism and is committed to conservative personal finance, I’d like to think that I’m above the fray when it comes to Christmas and everything that retailers love to throw at us. Unfortunately, I happen to enjoy a couple of gear-intensive hobbies (camping/backpacking & photography), and I love to research gear online. There’s nothing quite like a shiny new toy to make me feel good and as if my hours spent traveling and in the office are worthwhile.

However, as my wife and I are sorting through the aftermath of the holidays, I’ve been struck with what I will call the true cost of Christmas, or really, the True Cost (TC) of Anything .

Everyone knows that the most precious resource anyone has is time. You never get any more of it, you can’t control the speed in which it is spent, and you can never be certain of when you will run out of it completely. That’s why I like to think of the TC being in terms of time, and not in terms of money.

Here’s some simple math to illustrate what I mean. Let’s say that I want to buy a new tent for backpacking. It’s a considered purchase because the cost for me is somewhat significant (likely several hundred dollars). For this, as for every discretionary purchase I make, I must:

1. Research & go shopping (on- or offline) – at least 3 hours
2. Purchase the tent- 15 minutes
3. Take the tent out of the packaging – 5 minutes
4. Read the instructions (maybe) – 20 minutes
5. Throw away the non-recyclable packaging (1 minute)
6. Recycle plastics and paper (1 minute)
7. Take cardboard to the recycling center (30 minutes)
8. Figure out where to store the tent when not in use (10 minutes)
9. File the receipts and other documentation and fill out the warranty card (10 minutes)
10. Maintain the tent (seam seal it, check for leaks, repair and clean as necessary) (unknown amount of time, depends on use)
11. At the end of its life, find a responsible way to discard it via another trip to the recycling center (30 minutes)

That’s over 5 hours of Total Cost for that one item, the better part of a full working day. This math works for gifts as well, except you subtract the time required to go shopping (unless, of course, you don’t like the gift, then you must factor in the cost of returning it AND shopping for something else).

Naturally, unlike money there are qualitative vs. quantitative factors to consider, and your mileage will vary. The tent will provide quality time for my family outdoors, which is important to me. I would have a greater quantity of time to spend outdoors without buying the tent, but I doubt it would be as qualitatively enjoyable on a rainy night in early spring.

Now this is what floored me: I have hundreds (perhaps thousands) of items in my home that each must follow most of the steps outlined above. Christmas gifts added a score more. The Total Cost of all of the items in my home is astounding! Add two children, and things really get out of hand. My wife and I regularly try to get rid of things we don’t use, but I’ve yet to find an effective way of dealing with all of our stuff, as we still seem to be adding more junk than we’re throwing away.

I would love to hear from all of you as to how you manage your Total Costs for everything in your home. Am I alone here? Crazy? A closet hoarder in desperate need of an intervention?

In spite of some of my previous criticisms of Facebook, I have finally taken the plunge and signed up for a Facebook page. At first, it was simply a practical tactic to try and maintain some traffic to site during my difficulties with Google, but I’ve since continued to use it and update it to finally see what exactly my peers had said I was missing out on. A couple of initial observations:

1. It’s fun to get friend invitations from both your current cadre of friends and from people you haven’t spoken to in years.

2. 99% of the communication I’ve received thus far has, in fact, confirmed my initial assertions about Facebook: fun, but not much more than interesting entertainment for now.

3. I can absolutely understand the immense economic value of marketing on a network like Facebook. The opportunity to use the data contained within posts, status updates, associtions, groups, etc., is like having the largest and most detailed marketing database available. Oh, and did I mention that the majority of Facebook users fall within the most desirable demographic in terms of discretionary income?

4. Every interactive agency should have a Facebook and Myspace strategy for their clients if their target audience’s demographics (and attitudes!) fall within the required parameters.

5. Within a few days of joining, my Facebook page rocketed up to the #1 search result in Google for my name. In addtion to the day-to-day banter being fun, it’s also another great way for potential clients to find me (although I wish this site would get re-indexed by Google a little faster).

I know these observations are probably pretty obvious to anyone who has already joined, but for professional folks who don’t find a lot of value in it at first, I can say it’s probably worth setting a page up and seeing what happens.

According to a recent Prospectiv survey and Brandweek article, 56% of survey respondents stated that their social networking experience would be better if they were served ads targeted to their interests, and 62% said they would be interested in offers from their “preferred brands”.

While research is certainly important to our business, I’m not quite sure why anyone had any doubts about this issue. Ask anyone involved in sales at any level, and they’ll tell you: it’s much easier to sell to someone you’ve already sold to then to try to sell to someone new.

“But what about getting new prospects?” one may ask. Surely there is some value in the scattered, “shotgun” approach to buying online media, but it is much more valuable to create brand evangelists that are absolutely in love with your product or service. They’ll do the best job of creating new customers for you.

Advertisers can get such a bad rap in the name of trying to better the world, can’t we? A recent CNN article details some innovative (and presumably cost-effective) new ad placement technologies that Microsoft is developing for online applications. Of course, because it has to do with advertising and with Microsoft, all new technology must be “scary”.

What they are talking about actually sounded really cool to me. Check out this excerpt regarding the new role of advertising in streaming video going forward:

Microsoft — along with Google Inc. and other competitors — is also hard at work on new ways for companies to advertise their brands to Web surfers watching video clips.

One crunched a clip, looking for the most appropriate stretch of time and spot on the screen for an advertiser’s “bug,” or logo. For example, if a car company wanted to show its logo for 10 seconds in the bottom-right-hand corner of the screen, the computer program would find the 10 seconds in which the logo interferes least with the action in the video.

Another used speech recognition to make a transcript of a video, then served up ads — in the demonstration, they were text links — alongside the video. As the topics discussed on screen changed, so did the ads.

The third program scanned a video for surfaces where ads or product images could be inserted later. The demo showed how the same frames could display a Coke ad one moment and a Pepsi ad the next, without having to reshoot the video.

This isn’t scary to me…it’s exciting for a couple of reasons. First, inserting bugs or other visual content into videos is already highly annoying, so any technology that reduces how obtrusive those elements are is great with me. Second, we’re all looking for ads to be more relevant to us – both advertisers and consumers. Most people are at best disinterested in an ad that is irrelevant to them, at worst they are downright offended. I remember watching an episode of “Dirty Jobs” online at Discovery.com, and every single online ad was for a “regenerating facemask”cream that I had absolutely no use for (this did, however, confirm for me that there must be a lot of middle-aged women watching Dirty Jobs, or there was a totally inept media buyer for the facemask company.).

How much better would your media consumption experience be if it were personalized to you? Every other aspect of consumerism is heading this direction, and with good reason, because we’re all unique as people. Ads finally catching up with this isn’t “scary smart” to me, it’s refreshing.

Valeria Maltoni at Conversation Agent posted an article today that also contains some interesting perspectives on consumer pricing. Evidently, according to a study reported on by the Economist, people who pay more for something enjoy it more. Imagine that.

But what’s really interesting is that if you tell someone something is expensive, even if it isn’t, they will enjoy it more than if you tell them that it’s something cheap. My guess is that Freud would have predicted that, but it’s still interesting to see a legit study that backs this concept up.

So, if I were a seller, I’d immediately do three things.

1. Raise all prices on any goods that are not staples and/or have percieved value aside from necessity
2. “Precise up” all prices and eliminate all round numbers
3. Hire some really good marketers

And as a buyer, I’m going to immediately do three things:

1. Disregard an exact price and haggle anyways
2. Ignore most marketing that I didn’t sign up for
3. Look for social media and user-generated content to guide my purchasing decisions

On a side note, I just recently found out that the Economist isn’t about the economy. It’s about a bunch of different topics economized into one magazine. It’s well written and a good read, too.