Dear Dave: How do cash-back rebates work on electronics and other items?
Dear Dan: I like this question. Most consumers don’t think about how the process works. They only care that it’s benefitting them from a financial standpoint.
Let’s say you buy an item for $1,000, and you get a cash rebate for $100. Basically, you just paid $900 for that item, right? So, what the companies are trying to do is incentivize certain retailers to buy a particular product or amount of that product, yet sort of protect the sticker price in the minds of the consumers. To me, it’s really a little ridiculous. Why not simply take off the money, and price it at $900?
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That keeps retailers from jerking around with the margins. It purifies the process a little bit, but it adds to the hassle.
Dear Dave: Where should you save for large expenditures when you’re doing the Baby Steps?
Dear Heath: Depending on what the expenditure is, I would suggest saving for these sorts of things after Baby Step 3. Once you’ve paid off all of your debts, except for your home, and built an emergency fund of three to six months of expenses, you reach a point where you can breathe a little bit. After all that hard work and sacrifice, you’re finally in a position to replace that ratty, old furniture or get a better car. The question then is this: How much do you want to temporarily cut back on investing in order to make this expenditure happen?
Personally, I’d like to see you allocate a fixed percentage of your income toward play money and still be able to put 15 percent of what you make into retirement. If you want to slow down a bit on Baby Step 5, which is paying off the house, in order to take a once-in-a-lifetime vacation, I’m cool with that. But I don’t like the idea of slowing down on funding your retirement.
The basic idea here is to always handle your money with planning, purpose and maturity. You’ve got a little room to play back and forth once you get past Baby Step 3. But until then, I want you to be hardcore about scrimping, saving and getting your financial house in order!
Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.