The 1-2-3 Money Plan Part 10

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As a rule of thumb, wait one day for every $100 the purchase costs to avoid impulse buys. Of course, that rule works less well with very expensive items, such as a house or automobile. But for most purchases, it works well.

I find that just the process of researching a product sometimes satisfies a buying impulse, or at least dampens it. Reading some negatives about the product, whether in professionally written reviews or user reviews, helps provide perspective that can also extinguish the buying desire.

Waiting allows that intense l.u.s.t for acquiring something to subside. When you're clearheaded, you gain perspective about whether you really want it. Marketers know that time works against them. That's why high-pressure advertis.e.m.e.nts always tell you to "Buy now!" Infomercials entice you to buy, saying if you "buy now," you'll get bonus merchandise of some sort. It's why the car salesman says, "What do I have to do to get you in this new car today?"

There are very few purchasing opportunities that will disappear if you wait a day and reevaluate.

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If and when you go through with the purchase, you might be asked if you want to buy an extended warranty. Think about whether you want a warranty ahead of time, so you're prepared to answer the question. Almost all the time, the answer should be a flat-out, "No." See Chapter 3, "Get FIT (Food, Insurance, Telecommunications)," about insurance to learn why.

Price Protection.

After you leave a store or check out of an online retailer, you're not quite done with your smart shopping. Even if you've done your due diligence on shopping for prices, a product might go on sale shortly after you purchased it. That infuriates shoppers.

That's why many retailers offer a price guarantee. Often it states that if the retailer lowers the price within 30 days after purchase-protection periods vary-it will refund you the difference. For example, if just before Christmas you bought a $1,500 television and its price in early January drops to $1,200, you could request a refund of $300.

In part, a store's price-protection guarantee is a sales tactic. It can give a buyer peace of mind and entice the shopper to buy immediately instead of looking elsewhere or delaying a purchase. It's regret insurance.

But really, price protection is a by-product of a retailer's return policy. If an item's price decreases, a diligent consumer who recently bought the item might return the old product and buy the sale-priced one, pocketing the difference. For the retailer, accepting the return and processing another sale involves ha.s.sle and expense. To avoid that, the retailer offers price protection, where it just refunds the money and skips the ha.s.sle of a return and resale.

However, few consumers are conscientious enough to review advertised prices after a purchase and then claim a price-protection refund. So, the retailer rarely has to make good on its price guarantee.

Therein lies the problem: It's up to you to watch prices after you buy.

But now, some free Web sites will watch for you, automatically notifying you when prices drop. That allows you to quickly and easily claim your refund. If you paid with a credit card, often the refund will be credited to your credit card account. Of course, price-protection policies vary from store to store.

If you bought a big-ticket item at a well-known retailer, you could monitor its weekly advertis.e.m.e.nts, often in the Sunday newspaper or online, for the duration of the price-protection period.

Easier, however, is to log purchases into a Web site, called PriceProtectr.com. PriceProtectr watches prices on literally dozens of retailers, such as Amazon.com, Best Buy, Circuit City, Gap, Costco, Sears, Staples, Macy's, Toys 'R Us, Home Depot, RadioShack, Target, and Wal-Mart.

The big idea is to log purchases into PriceProtectr, which will send an e-mail notifying you if the price decreases within the price-protection period. It's up to you to actually request the refund. Durations of price-protection guarantees vary widely by retailer-from 7 days to 90 days.

Obviously, this is a bit of a ha.s.sle. But at least try it for major purchases, of more than $500, for example. And log your purchases during major buying sprees-holiday-gift shopping or back-to-school shopping.

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Yapta.com offers a price-protection service for airline flights you already booked.

How to Buy Services.

Many purchases we make today aren't things, but services. We hire and subscribe all the time: home contractors and plumbers, mail-order movie services, gym members.h.i.+ps, airline flights, and hotel rooms.

How to Buy Services, 1-2-3.

1. Seek reviews and references. Subscribe to Checkbook.org or Angieslist.com.

2. Research prices by getting three price quotes.

3. Reevaluate and review contracts carefully.

The three-step process for buying services is very similar to that for buying products. But you have a few different resources and tools available to you, along with some concerns that are specific to services.

If you look carefully, the steps are basically the same three Rs: Review, research prices, and reevaluate.

1. Seek Reviews and References.

For products available nationwide, finding reviews is relatively easy. But where do you go for reviews of local service companies, such as plumbers, electricians, and photographers? If you are new to an area, you will need a slew of service providers, from a doctor and dentist to, perhaps, a dog kennel and dry cleaner.

Trial and error is an inefficient, and potentially expensive, way to find good service professionals. Talking with neighbors and local friends can work, but opinions come from a very small sample of customers, often one. Or you can obtain referrals from related professionals. For example, you could ask a lawyer to help find a good accountant.

Listings in the phone book and online can give you an idea of some of the providers available, as can advertis.e.m.e.nts in local media. But they don't give you objective advice on whom to choose and why.

Because choosing wisely means you might receive a better price and better service, here are some better resources: * Consumers' Checkbook. www.checkbook.org is $30 or $34 for a one-year or two-year members.h.i.+p, depending on region. Members.h.i.+p in the nonprofit group Consumers' Checkbook, established in 1974, includes a semiannual magazine with articles and ratings, as well as access to its Web site, which has the most recent ratings of local service firms.

This is perhaps the most credible resource for unbiased reviews of local service companies. It accepts no advertising and has no business relations.h.i.+p with firms it rates.

Consumers' Checkbook doesn't just collect user reviews. It has a staff that does undercover price shopping, so it has apples-to-apples price comparisons, rather than asking members for their impressions about price. It also actively surveys consumers about the quality of service firms, rather than simply allowing anonymous posters to comment about firms, as some free Web sites do. Consumers' Checkbook won't officially list or evaluate a business until it has 10 ratings.

When it rates hospitals, for example, it examines risk-adjusted death rates and complications, based on millions of discharge records. It not only surveys patients about hospitals but doctors too.

The main problem-and it's a big one-is that Consumers' Checkbook is available for only seven metropolitan areas: Chicago, Boston, Philadelphia, Seattle, San Francisco, Minneapolis-St. Paul, and Was.h.i.+ngton, D.C. However, its ratings of doctors, hospitals, and health plans are for metro areas nationwide.

* Angie's List. A nearly nationwide reviewer of services is Angie's List, found at www.angieslist.com. Its subscription fees vary depending on home region.

Members.h.i.+p to the service includes access to the Web site, a monthly magazine, and a phone-in service if you want a staffer to search the site for you. It also offers a complaint-resolution service, where Angie's List personnel will try to help resolve a dispute with a service vendor.

Whereas Consumers' Checkbook is deep with information, Angie's List is wide, covering 120 metropolitan areas and 300 categories of service. Angie's List ratings are based on user reviews. It lists every report online for you to read, rather than only compiling results into ratings. The service does not allow anonymous reporting, it reviews reports that go into the system, and it limits the number of times consumers can report on a company.

A potential drawback is that Angie's List has a relations.h.i.+p with some service providers, including allowing companies to respond to negative user reports and selling highly rated companies the right to offer discount coupons on the site. For usability and credibility, though, Angie's List is superior to free Web sites that offer ratings of service companies.

* Free Web sites. The upside of free-ratings Web sites is they don't cost anything. But they are probably the most unreliable too. That's especially true if reviews are anonymous and unregulated. That makes it easy for companies to submit fake positive reviews about themselves or negative reviews of compet.i.tors, for example.

Because they're free, however, they're worth checking. But take ratings with a grain of salt. Examples of sites are Yelp.com, CitySearch.com, and AOL Yellow Pages. Service-specific sites include TripAdvisor.com for travel-related reviews, ServiceMagic.com for home improvement, and WebMD.com for medical reviews.

* The Franklin Report. Franklinreport.com offers recommended home-improvement providers in New York, Chicago, Los Angeles, Connecticut-Westchester County, N.Y., and Southeast Florida.

Other good resources include the Better Business Bureau, state licensing agencies, and state and local consumer affairs offices. For some national chain service providers, try sites I already mentioned for products, ConsumerReports.org and ConsumerSearch.com.

To keep it simple, subscribe to Consumers' Checkbook if you live in one of the covered regions. Otherwise, subscribe to Angie's List.

2. Research Prices.

Granted, this advice is as old as the hills, but you really should get three price quotes, especially for expensive services.

Is $18,000 a good price for re-siding your house? You really have no idea until you get multiple quotes. Is it reasonable to pay $80 a month for a gym members.h.i.+p? It depends on what you get, right? Maybe for you the YMCA is a better deal than Gold's Gym, LA Fitness, or Bally Total Fitness.

I could write a whole other book on finding travel deals. But you should especially compare prices on the staples of airline tickets, hotel rates, and rental cars-and to some extent, cruises.

The Internet can help here too. Check the big online travel sites such as Expedia.com, Orbitz.com, and Travelocity.com. But you might find better flights and fares at such aggregation sites as Kayak.com, which searches 200 sites, and Mobissimo.com, which might be better for international flights. Both sites also search hotel and car-rental rates. If you don't know whether to book a flight now or later, check out Farecast.com, which helps you predict whether ticket prices to your route will be going up or down. You can bid for rates at Priceline.com and Hotwire.com. For travel reviews, see TripAdvisor.com.

The point of getting multiple price quotes is to know what the range of prices is. That's fundamental to being a smart spender.

Be Afraid of Commitment.

One of the biggest consumer traps comes from subscription services. That includes a book-of-the-month club, satellite radio service for the car, a fitness club members.h.i.+p, or even your pay television service.

Automatic payments-often monthly payments-are insidious because they use inertia. Once you sign up for an automatically renewing service, it's way too easy to let it continue, even if you don't want the service anymore. Unless you're ultradisciplined, you probably have one of these automatic-payment spending regrets in your past-and probably, you have one on your credit card bill right now.

It's understandable. We're busy people. But it's worth going through your credit card statement and automatic bank debits to find some services that you should eliminate. If a service is worth it to you, by all means, continue it. But chances are you'll find something to cut out that you won't miss.

The problem is that we, as consumers, are far too optimistic about how much we'll use services when we sign up. Marketers of services know this about us. That's why they always break down payments into easy installments, usually monthly. Sometimes, they go further, citing the price as "less than a dollar a day," instead of $350.

When considering a service, be wary of long-term commitments and choose a la carte or per-use pricing at first-until you know how often you'll use the service. And convert the monthly cost to an annual cost, which seems to put it in better perspective. The $80-per-month gym members.h.i.+p doesn't sound so cheap when expressed as nearly $1,000 a year.

By the way, automatic spending is bad for the exact reason that automatic savings is good. You do it without thinking.

3. Reevaluate and Review Contracts Carefully.

As with products, you want to avoid impulse buys you later regret. So, unless it's an emergency, like a broken pipe flooding your house, take your time.

Make the effort to read through contracts for bigger jobs. If it's an especially large project, like a major home renovation, you might want to have an attorney review the contract.

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Try haggling. Especially with services, the price isn't always the price. Sometimes, you can get a better price just by asking for a "best and final" quote. With products, ask for a better deal if you're buying multiple expensive items at the same time, such as a refrigerator and dishwasher or a whole room full of furniture. The more knowledgeable, firm, and aggressive you are, the more likely you will succeed.