The Impact of Microtransactions:

The term microtransaction was originally coined in the gaming industry to describe the money a person would pay to help them win a “free” game. These transactions could range in price anywhere from $1 – $30.  In fact, the microtransaction games are becoming more profitable than games that charge a one-time fee.  What seems to be a relatively small amount of money per transactions quickly adds up to a lot of money.  The term microtransaction is starting to be used to describe any transaction that is of nominal value.  And yes, the vendors want you to think of it as nominal so you are more willing to make an impulse buy.

When thinking about personal budgets, these small transactions are ones that we usually do not think to include in our spending plan. While small transactions can make big profits for business, they can make a big impact on a budget, especially when we do not realize how quickly they add up. As always, this post is more about mindful spending than it is about saying a person should or should not buy a specific thing.

I would like to look at a few examples of microtransactions from my budget and a couple of my friends (who do know I am writing about them).  So, the first thing that comes to mind when I think of microtransactions is my tea. I used to get a tea every work day, either in the morning or at lunch; sometimes both.

Depending on where I go to buy my tea it can cost between $1 -$2.50. Taking the average that is at least $37 a month and $451 a year if I buy only one and only on work days. Let’s face it, the truth is I was buying tea more than once a day. In my mind it was only a couple of dollars and I did not think much about it.  Here I am the budget lady and I am mindlessly spending at least $500.00 a year on tea.  Don’t get me wrong I still buy tea, but now I make tea at home and bring it in my travel cup more often than I used to.

Coffee and smoothie drinks are another example of daily transactions that quickly add up. I have two coworkers who get either Starbucks coffee or a smoothie every work day. We all know premium coffee can add up but what surprised me was the green smoothie was costing my coworker $6 every day. I am told the cost of each drink is about the same so doing the math we are talking $129 a month and $1,548 a year.

Smoking is the last example of microtransaction spending that many people do not include in their budgets. Based on a quick internet search a pack of cigarettes cost anywhere from $5.25 – $12.85.  I am going to go with a middle number and assume 2 packs per week. This assumption is for illustration and based off the people I know who claim to be casual smokers. Even a casual smoker is spending about $60 a month and $720 a year. The number only goes up from there when you are someone like my coworker who admits to smoking a pack a day for an average of $2,555 a year. Again, no judgement, but when asked where does my money go…it goes to coffee and smoking.

The reason I find microtransactions so interesting is because we all have spending habits that we are not really conscious of but make a huge impact on our budget.  This makes it harder to reach our financial goals.

The examples I gave are simple ones but can include so much more. Just think about every time you just add that one little thing to your shopping cart and think it is only an extra few dollars for X or Y. Next thing you know it is the end of the year and a few dollars here and there add up to big money.  To tie this back to the original term, I read that microtransactions in games generated 22 billion dollars of revenue in 2015 and is expected to reach 32 billion by the end of 2020.  Small spending adds up to big money on both sides of the equation.

Budgeting Worksheet: Sample budget to get started

Today I read a really great post from another blogger about their budgeting experiences and journey. In her story, the writer mentioned that one thing that helped was finding an old budget sheet to track expenses. I mentioned this idea in an earlier post as well but reading it from another person today made me think it might be a good idea to clean up my budget worksheet to share with anyone who may need a copy to jump start their budgeting journey.

This worksheet does not cover every category but I tried to think of the top items that a person might want to track. Please feel free to share in the comment section of this blog any categories that might be useful to add to a budget worksheet.

This week, in my usual Tuesday budget post, I will be talking about micro transactions. I look forward to continuing the conversation at that time. Okay, at this time the conversation is a bit one-sided 🙂

Business Travelers: We love our points programs, and here’s why.

As a business traveler one of the biggest perks is getting points from hotels, car rental agencies, airlines, and sometimes credit cards. These points can be used for upgrades to make travel for work more comfortable, to help pay for personal travel, or in the case of credit cards cash back. My main blog was started to talk about money and budgeting so I thought I would spend a little time doing a tie in on how work travel helps my budget.

 Everyone where I work has their favorite perk, but mine is the hotel points. As a software trainer I stay 2-3 weeks in one location meaning I rack up more hotel points than airline points. At my company we share cars so I don’t get many car points either. Thus, hotels give me the biggest benefit.  I have signed up for points with the major hotel brands so no matter where I end up staying, I will get some kind of benefit. However, Hilton happens to be my favorite hotel chain for now.

 Because I stay with Hilton as often as I can while I travel, I have earned the highest status for the year (Diamond).  As a Diamond member I can choose to have free breakfast at all the Hilton brands, even the ones that normally charge for breakfast. For example, at the Hilton Garden Inn they charge on average $10 for a cook to order breakfast each day; with my status that is free. This ended up saving me $210 over a 21-day trip. Since the company gives me a set food allowance while traveling what I save using points programs goes straight into my pocket.

If that were not enough, I also earned points toward future travel. I just completed a 3-week trip in January for which I received 66k point. This is where I get a lot of value for the time I spend on the road and the money my company spends to pay for the hotel. I use the points to pay for hotel stays for personal travel for myself and family members. Recently a family member wanted to attend a gamers convention in Pennsylvania; the nightly rate at the local Hilton Garden Inn during this time was $119 per night, the points cost was 30K per night.  Of course, I am going to use my points to pay for the room and both of us get free breakfast. Doing the math, using the points from one business trip I get to save about $275 (before tax) on personal travel.

Airline points are the next biggest bang for the buck. It takes a lot longer to earn them since I do not fly every week. Airlines do make it difficult to earn status and the more status you have the more points you earn. But once I have those points and use them strategically, they sure add up to a huge benefit. It took me about 3 years to get enough points to pay for 2 tickets to England. All I had to pay for was the taxes. Instead of paying $1,200 per ticket I paid $200 per ticket. Using points to pay for $2K worth of plane tickets helped make a dream vacation a reality. Beyond earning tickets, if I get enough status in a given year, I have a chance to get a free upgrade on my favorite airline (Delta). In my case the upgrade is usually from economy to economy comfort but sometimes I get a first-class upgrade. The company pays for the cheapest ticket they can find so even economy comfort upgrades saves me about $100 or so per trip.

Car rental points are my least favorite, but only because we share cars on my project so it is more difficult to earn a meaningful amount. The nicest thing about car rental point programs is being able to use the status to get an upgraded car occasionally. Once in awhile I can earn enough to get a weekend rental for free.

Depending on the company a person works for, credit card points can be a good benefit as well. The company I used to work for required all employees to pay for travel with the company credit card (fair enough). But my new job lets us pay with a personal card and claim reimbursement. This means I am putting a lot more on the card and then I use the points for travel or cash back. The cash back adds up to a few hundred dollars a year, but that is a few hundred I would not have received if I did not travel for a living and used my credit card to do it.

In the average year the various points programs add up to a benefit of 2-3 thousand dollars. I get free breakfast, free hotel nights, airline upgrades, and a little cash back. The points used toward travel are an implied benefit because it assumes, I would have spent the money on a vacation or travel regardless of what job perks I have. But the money I get to keep from the food allowance is money straight into my budget that I can use on other things. Business travelers love their points programs. If we are going to live on the road we may as well get benefits that are there for the taking.

Disclosure: I have no affiliation with any of the companies I mentioned beyond being a normal member of their programs. They do not know I write about them.

Commuting Expenses; A Secret Budget Killer

There are several ways expenses can sneak up on you and kill a budget. One that does not get a lot of attention is commuting expenses. Depending on where you live expenses to commute might be small, in other places it can be a significant cost.  In this category some of the expenses are obvious but others are secret budget killers.

I used to work in a mid-sized city about 10 miles from my home and I never really gave any thought to how much money I spent just getting to work every day. There was no toll road, no parking fees, gas for the car was minimal, and 10 miles each way is not a lot of wear and tear on my car. In fact, after 6 years of owning the car I had only 50,000 miles on the odometer.  I was already accounting for the costs associated with the commute by having a line for gas and a line for regular car maintenance. That is enough right? Just nod yes and play along.

The contract I was working on ended and I found a new job in a bigger city where space is at a premium. I cannot afford to live close to the office…. well live next to the office and have any kind of space.  I moved closer to the office but it is still approximately 30 miles each way. Where I work toll roads abound, parking fees add up quick, I spend more on gas, and the wear and tear on the car is sneaking up.  Don’t get me wrong, I am happy to have a good job, but commuting expenses are a real budget killer that I did not really factor in when I negotiated my salary.

In the previous location I spent maybe $50 total on gas all month, partly because I lived close to work and partly driving a hybrid car. I set aside a small amount for maintenance, which was mostly for oil changes because I was putting less than 10k miles on the car a year.  Now I spend about $100 a month on gas driving the same hybrid car, and pay $240.00 a month parking. I actually found a way to avoid the toll roads thank goodness because that was costing me $14- $20 a day depending on the time of day. If you look at the difference, I went from spending maybe $75 a month to drive to work to spending $340.00 a month. If I took the faster toll roads it would be approximately $640.00 a month just to drive to work.

Some of my coworkers from my old job are also coworkers on the new job. They choose to continue living in our mid-sized city and their commute is driving their car to the closest train station and taking the train, some use a van pool. Either of these options are secret budget killers as well. One coworker told me that once he pays for the gas to drive to the train station and then pays for the weekly train ticket, he is paying $200.00 a week in commuting expenses.

Any commuting option when working in a big city like I do is going to cost enough money that one should budget for these items. By sacrificing some of my free time I am at $340.00 a month, my coworker is at $800.00 a month, others are somewhere in the middle. Getting a grip on this expense has been an eye opener when it comes to my budget.

Even if you don’t work in a city that requires you to spend a lot on commuting, it is still worth taking a look at how much you really spend on these types of expense. While it cannot always be avoided, at least we can be more mindful about where our money goes. I wish I had been more aware of these expenses before I negotiated my new salary. To leave on the bright side, at least I travel part of the year and save on some of these costs when I am on the road.

Life of a Business Traveler

When I tell people that I travel for a living people often say how lucky I am. It is like they imagine that my life is one never ending vacation full of exciting adventures. Being a business traveler does have it’s perks but it is not as exciting as people might think. In this series I will talk about my experiences traveling.

Let’s start with some of the cool things about traveling for a living. I have been traveling as a software trainer for several years now. It is great to go around the world meeting new customers and help them transition to a new piece of software. As a trainer I have been to half the states and 6 countries. Not bad for a few years work.

One big perk of traveling is many companies, like the one I work for, allow the traveler to keep their airline, hotel, and rental car points. After awhile this really adds up and one can pay for the bulk of a vacation with points. A couple of years ago I went to the U.K. for 14 days; the plane ticket and 10 hotel nights were covered by points. I only had to pay for car rental, food, and entrance fees to the places I wanted to see.

Another perk of traveling for a living is the extra income. My main blog is about creating budgets and spending money mindfully. The travel allowance I get for food while I am on the road helps me buy some of the little luxuries in life without having to take the money out of my regular pay. Even if I could eat enough to spend all my food allowance (which I don’t), just not paying parking fees, gas for my car, and wear and tear on my car while I am traveling is a good implied benefit.

But traveling is not all fun and games. Most of my time is spent in a conference room teaching class. After awhile one conference room is the same as another. One hotel room is really the same as another as well. The typical week is travel to location Sunday afternoon/night. Arrive at training location early Monday morning, teach all day during the week, spend a good portion of the evening doing administrative tasks and preparing for the next day’s class. Most times we leave on Friday night or Saturday morning. This does not leave a lot of time for seeing sights.

If I get lucky I might be assigned a business trip that covers a weekend and then I do have a couple of days to see some sights and enjoy seeing things I may not have taken vacation time to see. For example, a couple years ago I was in Upstate New York near the Canadian border. One Saturday I drove to a cute little town called Alexandria Bay, did a river 1.5 hour river cruise of the islands in the area and stopped to see Boldt Castle (google it if you are interested in pictures of this cute castle recreation).

I have set a basic foundation of what I have experienced over the years of being a business traveler and as the series goes on I will share my experiences on the road this year. While I will write as I am on the road, I will publish after the fact. One of the risky things about traveling for a living is when people to know you are gone. It is like putting up a big sign on your lawn saying “Please come rob me, I won’t notice because I am not home.” But really, I live with other people so someone is home…you get my point though.

Life as a business traveler can be fun but is also a lot of work.

Budgeted vs. Actual Expenses

Hello world, this is Cipher, back to talk about the budgeting process. Today I would like to spend a little time talking about looking at budgeted vs. actual expenses.  In order to make a budget work for us so reach our financial goals, it is important to know what we actually spend, not just what we think we will spend.

In some cases, keeping track of budgeted vs. actual expenses is easy. Rent payments are not going to change from month to month for the duration of the lease. Electric bills on the other hand are subject to change each month based on various factors; some of which we cannot control. I know my electric bill goes up in the summer when it gets very hot…not the good kind of hot either, the kind with humidity that makes you think you are drinking the air.

The fluctuations in bills like water, gas, and electric are only part of the equation. We need to know how much we actually spend on things like food, entertainment, and other types of discretionary spending. Keeping track of these things will help us identify patterns in our spending and then make mindful choices if the patterns point to a behavior that we may want to change.

At least once a year I review/update my budget and I use the highest number from the prior year to create my new budgeted amount for a category. For example, my water bill in winter might be $40 a month and $75 a month in summer. I will budget for $75 all year because I want to know that in the worst-case scenario I will always be able to pay the bill. In the months that cost less, I have extra money to allocate to savings, extra fun stuff, or pay down debt. It is nice to have extra money instead of scrambling to pay a higher bill.

I tend to pay for most items with my debit card, so at the end of the month I go over my statement and fill in the amounts that fluctuate. The reason I like to go over the statement is the effort makes me really think about the choices I made.  I can hear some young person out there saying “Okay grandma, I don’t want to go over my bank statement with a fine tooth comb each month.”

I was having this conversation with a coworker recently and she mentioned that she uses an app tied to her debit card that allows charges to be categorized and it provides a chart. I am sure there are several but her choice is called Mint. This is not an endorsement of any product, just an idea to share.

While I have a preference on how to get my information, at the end of the day it is not important how you get the information, just that you have it. This information will help make the budget more accurate as time goes by.