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spending

How many hours did you work to buy that?

A few weeks ago, I blogged about considering the cost-per-use for items that you buy. As most of you know, with the cost-per-use concept, you take the purchase price of an item, and divide it by how many times you think you will use it. For example, when I buy a pair of black flats for work, I will likely wear them 3 times per week, for 2 years. So (52 weeks) x (2 years) x (3 wears per week) = 312 times before I buy a new pair. If my shoes cost me $75, that’s about $0.24 per use.

Another way to help you determine whether something is worth buying or not, is to figure out how many hours you will have to work to purchase that item. It can be a serious eye opener. I used this approach a lot when I was a teenager making $8 an hour. When I realized I would have to work two full days in order to pay for a university application fee, I asked for my hours to be increased. And when I broke a heel on a pair of boots, I calculated that it would cost me 12.5 hours of work just to replace them – so I spent the equivalent of one hour of work getting them repaired instead.

Today, I use the same method when I’m thinking about buying a big-ticket item. For example, in 2011 I worked approximately 60 hours each week (60 hours x 52 weeks = 3,120 hours total). I earned around $80,000, which means my hourly salary (before tax and deductions) was $25.64. After tax, my true hourly wage was around $18. So when it came time to making the decision to get adult braces, the $6,980 price tag meant that I would have to work 387 hours just to pay for them – or nearly 6.5 weeks. Yikes.

I go out for lunch with co-workers almost every Friday. This costs me around $10. After taxes, my true hourly wage is around $23. Which means I have to work less than 30 minutes to pay for that meal. To me, it’s worth it.

My mortgage is $1,070 per month, which ends up being about 46.5 hours – or less than 1 week of work for me, after taxes. That’s also worth it.

Then there was a gorgeous dress I saw online at Anthropologie, but it was $300. And as much as I loved it, I couldn’t justify the 13 hours of work it would cost to pay for a dress.

You get the idea. Obviously this method, much like the cost-per-use method, has its pros and cons. But I really do find it helpful to break down how many hours I have to work for something to see if it’s worth it.

So the next time you have a few minutes, take into consideration your wants vs. needs. How much of what you are spending on a regular basis is on needs – like groceries, rent, insurance, and utilities? And how many hours are you actually working each week just to pay for the stuff that you want?

Asking yourself these questions is important, and taking the time to calculate how many hours you have to work to afford something is a really great exercise in the value of a dollar. A dinner out with friends every week might not seem like a big splurge, but if you’re making minimum wage, or you can’t pay your bills, or you are drowning in debt, or you’re working overtime just to make ends meet (so that you can continue buying stuff), maybe it’s a good time to evaluate what you can truly afford.

Is the lifestyle you’ve built for yourself worth the hours you put in?

Do you ever calculate how many hours you have to work to buy something?

Do you think it’s a valid method to evaluating purchases?

Do you have a store credit card?

We’ve all been in this scenario before: as you approach the cash register to pay for your purchase, the clerk tempts you with an additional 20 per cent off your purchase if you sign up for their store credit card. And even though you know you don’t need another credit card, and you rarely ever shop at the store, you can’t help but waiver just a little bit. After all, everybody likes saving money, right?

Store credit cards can be enticing, especially when they offer a deep discount on the initial purchase, a rewards program for frequent shoppers, or a “no payments” plan for a certain time period.

When I was 19 years old, I applied for a Sears card with a $500 credit limit. As a promotion, I received $10 off my first purchase, which might not seem like a big discount, but to a teenager making minimum wage, it represented over an hour’s worth of work. I also earned rewards for my spending – I’m pretty sure it was 2%. To me, this was the dream scenario. Not only did I work at Sears (and was able to get an employee discount, plus first-hand knowledge of sales), but I was also excited to have my own credit card. It made me feel grown up.

I thought I would be able to handle such a small credit limit, and I told myself if I ever made purchases on my Sears card, I would pay off the balance immediately at the cash register. But when Christmas came that year, I ended up maxing my Sears card in order to buy presents. And it wasn’t until four years later that I completely cleared the balance and canceled the card.

The Sears card was my first and last experience with a store credit card.

Related: What loyalty cards do you carry in your wallet? 

If you are a frequent shopper at a store, and are able to keep a zero balance every month, a store credit card can be a good way to save money. But for the rest of us, here are four reasons (from my own personal experience) why store branded credit cards are not a good idea:

High interest rates

Most of the time, a store-branded credit card will have an interest rate that is much higher than a regular card – with rates generally between 20 to 30%.

Additionally, store credit cards will often have a very tiny minimum payment, usually under three per cent. My Sears card had an interest rate of 29.90% and a minimum payment of $10 or one per cent of the new balance – whichever was greater.

Low benefits

You usually won’t benefit from the rewards program associated with a store-branded credit card unless you are a frequent shopper.  For example, the Sears card offered a $10 gift certificate for every 1,000 Sears points earned. At a rate of 2 point for every dollar spent, there are plenty of no-fee credit cards available with similar, and more flexible rewards systems.

Forced to shop in one place

When I had my Sears card, I felt more of an urge to shop there because I knew I could put my purchases on my store credit card. Even if I could have found what I was looking for at a better price somewhere else, I didn’t have the cash to buy it at the cheaper price.

Your credit score

Even if you pay your balance in full every month, many different things can affect your credit score, and that includes opening and closing credit accounts. Receiving a small discount by opening up a store credit card is not worth the potential headache and problems you could run into if your credit score prevents you from getting a good mortgage rate in the future.

What has been your experience with store-branded credit cards?

How to make a claim using PayPal

If you’ve ever purchased or sold anything on eBay, chances are, you’ve probably used PayPal before. PayPal is the most widely recognized payment method on eBay because it offers its customers financial security through their Purchase Protection program – where eligible transactions are covered for the full purchase price, at no additional cost to the consumer. I also use PayPal for the majority of blog income, since advertisers prefer to pay electronically, instead of cutting cheques.

Even though I’ve often talked about how high the PayPal fees are, their Purchase Protection Program not only covers transactions where you don’t receive an item you’ve purchased, but it also protects you if you’ve received an item that is significantly different than what was described.

You have to open a dispute through PayPal within 45 calendar days of your purchase. That’s not a lot of time, so if you’re waiting for an item to arrive, you really need to be watching the calendar to make sure you’re still within the time frame.

Once a dispute is open, you will be able to discuss the problem with the seller (through PayPal’s Resolution Centre), and try to come to a mutually agreeable resolution. It’s important to be clear and try to come up with solutions on how to resolve the issue.

However, if you can’t come to an agreement, you have up to 20 days to escalate your dispute to a claim – otherwise your case will be automatically closed. When you escalate to a claim, you are essentially asking PayPal to make a decision based on what is noted in the dispute file (your conversation with the seller), as well as any additional information they might as either the buyer or seller.

I’ve used the Paypal Purchase Protection Program twice. The first time was in 2006, when I bought a $500 digital camera on eBay that never arrived. It was a very smooth process, and the seller and I were able to come to an agreement during the dispute process, where I received a full refund from the seller for the purchase price of the camera.

Last year, I had to use the PayPal Purchase Protection Program again. On December 6, I ordered a pair of TOMS shoes for my boyfriend from an eBay seller in Texas. It was going to be a Christmas present. But by January 12th, I had yet to receive them in the mail. I e-mailed the seller to tell him that I understood it was the busy holiday season, but if my shoes didn’t arrive by January 18th (Day 44), I would be forced to open up a dispute as per the PayPal policy.

During the dispute phase, we were able to communicate with each other via the PayPal website. We agreed that I would wait until the end of January, and if I had not received my shoes by then, I would escalate my dispute to a claim, in order to try and get my money back.

Escalating a dispute to a claim is a bit of a gamble, because you just don’t know whether PayPal will side with the buyer or the seller. It’s really important to communicate openly and honestly with the seller, and keep record of every e-mail and phone conversation you’ve had – it will work in your favour to have as much proof as possible.

On February 1st, I escalated my dispute to a claim, and on February 7th, PayPal ruled in my favour and I received my money back.

Have you ever had to use PayPal’s Purchase Protection Program?