Mrs. Micah: Finance for a Freelance Life

Income-Based Repayment for Student Loans

mrsmicah — Fri, 03 Jul 2009 11:00:01 +0000

The Federal Student Aid site has put together a great page on their new Income-Based Repayment Plan. Income-Based Repayment (IBR), is just what it sounds like–a repayment plan for federal student loans that caps your minimum based on your income.

Which Loans are Eligible for Income-Based Repayment?

According to the site:

Any Stafford, Grad PLUS or Consolidation loan made under either the Direct Loan or FFEL program is eligible for repayment under IBR, EXCEPT loans that are currently in default, parent PLUS Loans, or consolidation loans that repaid a parent PLUS Loan.

How do I Enroll in Income-Based Repayment?

If you check out the IBR page and think you’re eligible (you can use the calculator to find out), contact the people holding your student loans directly. Let them know what you’ve found, the results the calculator gave you, and discuss your options.

What Does Income-Based Repayment Look Like?

The IBR page has a sample chart and a calculator which you can check out. Here are some sample numbers from the chart:

For a family of two with an AGI of $50,000, the max monthly payment would be $352. For a family of 1 making an AGI of $20,000, the max monthly payment would be $47. For a family of 4 making $35,000, it would be $24.

What Are the Advantages of Income-Based Repayment?

This biggest advantage of being in IBR is that you should get a monthly payment you can afford. For some people, this will make a huge difference, especially if they have a large student loan for a low-paying job. It’s not the same as a deferment, as you do have to pay the monthly amount you’re assigned.

However, as with some deferments, the government will cover the interest accruing if it is not covered by what you’re paying each month. This only lasts 3 years–after that, as long as you’re under the IBR the interest will be added to the total of your loan.

Other advantages of being in the IBR program are a) a 25-year cancellation–if you can’t pay it off in 25 years, your loan ends anyway and b) a 10-year public service loan forgiveness–details available in this PDF.

What Are the Disadvantages of Income-Based Repayment?

There are two downsides to using IBR. One isn’t so bad–if you’re in the IBR program you have to prove your eligibility every year. Small price to pay for paying less.

The second is that IBR lengthens the period you’re paying your loan (after your IBR eligibility ends) because you’ve paid off less of the principal while you were making reduced payments. Therefore you also pay more in interest, even if all your interest was covered by the government while you were in the IBR plan.

Even though it lengthens the time and the amount you pay, this plan may be a lifesaver. When asking your loan holder about it, ask about the possibilities of paying more each month and having it applied to the loan’s principal. If that’s not an option, try putting aside your budget snowflakes and extra money you can put toward loans in a special savings account and make one mass payment toward principal once you’re out of the program.

Content © Mrs. Micah 2007 - 2009. This content may only be reproduced in excerpts by legitimate bloggers.

I reserve all rights to decide who is a legitimate blogger and to report scraper sites to Google, possibly serving them a DMCA notice. But if you’re an ordinary blogger, feel free to use an excerpt!

Fiancés Combining Finances

mrsmicah — Wed, 01 Jul 2009 11:00:19 +0000

Recently, another blogger was asking on Twitter for our opinions regarding his fiancée’s suggestion that they combine their finances. Since the wedding was not for another year, my answer was emphatically no, even if they were living together. If they were getting married in a month, I’d probably still have said no, but agreed that they should look into how they were going to combine their finances if they planned to do so after they married.

Since I hear of so many couples keeping their finances separate even after marriage, I kept thinking about his question and my biggest reasons for saying no. Many small reasons occurred to me, these two big reasons apply to any couple and are something every couple (especially those without the legal protections of marriage) should consider before combining finances:

1. One of You Might Die

It happens. I lost a friend who had just graduated from college and was on the verge of getting married. Car accident on her way home from work. Even if you’re young and healthy and in a stable and happy relationship–all of which she was–that can be taken away in the blink of an eye. Another woman I know came down with acute leukemia a couple months before her wedding, though she was still able to get married in a small ceremony and is undergoing treatment. We all hope for the best.

Death is something married couples should take seriously too–with wills and legal protections for their spouses. Unmarried couples run a greater risk, however, especially if they don’t have wills leaving everything to each other.

Suppose that you and your fiancé(e) happily live together and contribute your paychecks to shared accounts. You’re sharing the daily finances as well as saving for the future. Without legal protection, you could lose half of that money (even if you contributed more than half).

2. You Might Decide to Break Up

Couples break up. It’s unfortunate and often sad, but it happens. A married couple has the divorce process to help them split up their assets and decide what’s fair for who to get what. It provides a third party to assess their situation and enforce action.

An unmarried couple with merged finances will have to figure it out on their own. There’s also no one to enforce the agreement. And even if it’s a harmonious breakup, separating the finances will leave both parties with a headache and possibly a sense of resentment if one person feels s/he didn’t get enough money back. In fact, it may make the breakup as painful as a divorce.

Moreover, combined finances may be a reason to keep one person or both in an unhappy relationship because it’s going to be too hard and complicated to break up.

One Safe Way Fiancés Can Combine Finances

So should people who aren’t yet married but plan on being so never combine finances? I can think of one reason and one way that combining some finances might work out for a couple.

For fiancés who are living together in anticipation of getting married, it may be easier to share the household expenses if you both contribute a predetermined amount of money each month into a shared checking account to be budgeted for household necessities.

The other alternative is to split up responsibilities between the two of you. But I think there’s a good argument for each being able to pay all the bills, trade off doing the shopping, etc. This way, all you stand to lose is one month’s expenses.

If you want to save for a shared goal, such as a house, I suggest parallel saving accounts and sharing your numbers rather than combining your savings.

What about LGBTQ Couples?

One reason this topic stuck with me is that I spent the weekend visiting friends and attending the commitment ceremony of a couple friends of ours. They’ve been together for 14 years and show no signs of breaking up any time soon. Yet their state and the federal government would not recognize their marriage or civil union or allow them to either marry or get a civil union.

Should they combine finances?

Even gay couples in civil unions and marriages don’t have marriage equality on a federal level, meaning that they won’t be free of estate taxes the way other couples would and cannot use spousal Roth IRAs they way that straight couples can. This means that a couple deciding to combine finances should very carefully set up wills, powers of attorney, etc, beforehand in case their spouse becomes to ill and unable to function financially or dies.

With all these in place, it may still be advisable for LGBTQ couples (as with straight couples) to keep some money in reserve in case their accounts are frozen while a will is being executed. And until there is marriage equality, there won’t be the same divorce procedure to straighten out finances, so it may be in their best interests to keep their long-term savings separate even if they don’t plan to separate.

For more information about financial best practices for gay couples, check out Queercents and Fiscal Fitness for the Rest of Us.

Content © Mrs. Micah 2007 - 2009. This content may only be reproduced in excerpts by legitimate bloggers.

Week 4 PF Blogger Weigh In

mrsmicah — Tue, 30 Jun 2009 15:15:45 +0000

This June & July, a number of PF Bloggers are participating in the PF Blogger Weight Loss Challenge, organized by Baker of Man vs. Debt. I’m participating by increasing my strength training, since I don’t need to lose weight.

Since Baker’s gone halfway around the world, we team leaders will be posting the results on a shared spreadsheet and taking turns publishing them on our blog. As Gamma team leader, it’s my turn–though I’m a little late because I was out of town.

Unfortunately, traveling got me off my weightschedule, so I have nothing to report last week–I did it some days before leaving, but didn’t meet my goal. And now for the full results:

Week 4 Results

(click to see the full-size PDF of the results)

And the winner is……….the Gamma team!!

Thanks to a strong showing by Baker, the Gamma team has pulled ahead both in terms of weight lost this week and overall weight loss (though Zeta is .5 lbs behind us and hot on our heels).

Gamma team members are:

Me!
by Baker @ManVsDebt
From Splurging to Not Spending by Kelly @centsiblelife
Does a (Recovering) Alcoholic Have a Financial Edge Over You? by Neal Frankle @NealFrankle
Wedding Season is also Regifting Season by Kim McGrigg @moneymanagement

Congrats everyone and good luck next week!

Content © Mrs. Micah 2007 - 2009. This content may only be reproduced in excerpts by legitimate bloggers.

Get Laid Off: Start a Business? - Guest Post

Guest Poster — Mon, 29 Jun 2009 11:00:34 +0000

As we are still traveling back from Indiana, this is a guest post by Dan Holt, a former personal finance blogger who has recently written a book.

The following article contains condensed excerpts from $100K to Nothing – Layoff: My journey from a six figure income to the unemployment line in the worst economy of our time by Dan Holt. You can find out more about the book at www.100ktonothing.com.

I was laid off earlier this year, and like the 14.5 million other unemployed Americans, am having a tough time finding a new job; any job, let alone one that compensates me as well as the one I lost. I’ve read Mrs. Micah’s articles since December 2007, and watched as she grew her income by working part-time in a hospital, a library gig, freelance writing, editing and quilting, and later expanding into freelance blog design. Now, as she has a full-time job, she is cutting back on those side projects to balance her life.

I am at the opposite of the spectrum. I just lost my job, so I need to balance my life by adding a little more work, preferably unrelated to my job search. Since I had entrepreneurial ideas when I was working that I didn’t have the time to fully implement, I immediately thought: should I start a business now that I have the time to devote myself fully to it? Should you? The answer hinges on your thought process.

If you are starting a business that utilizes the skills you have, and which you have researched the market for, then perhaps the answer is yes. If you are starting a business because you can’t find or get a job and you want to make some money (preferably a lot of money,) the answer is definitely not.

A major consideration in your decision-making is money. In fact, money is the major consideration for anything you do in unemployment. Do you have money to cover the start-up costs? Do you have money beyond that to live on for a year or more until the business becomes profitable enough to provide for your family? If you don’t, then get a job and save up that much money and then decide if you want to leave your job for the world of the self-employed.

Even when I was working, I wanted to be an entrepreneur. That desire has increased exponentially since the corporate world decided to eliminate my job to boost quarterly profits. I am pursuing some business ideas I have, and I’m exploring others. But, I have not stopped searching for a job. One reason is that I don’t want to lose my unemployment check. A more important reason, the most important, is that I have saved up enough of an emergency fund to survive unemployment, but not enough to cover my household expenses for enough time to bring a business to significant profitability.

I provide, or used to, the sole income for a family of four, and I am not ready to bet their future on a business yet. I either need a better business idea, or I need to get a job and save up enough money to start my business and devote myself to growing it without having to worry about it providing enough income to feed my wife and sons.

What would you do?

If you’re interested in reading the full book, you can find it on Amazon or check out your local library.

Content © Mrs. Micah 2007 - 2009. This content may only be reproduced in excerpts by legitimate bloggers.

7 Tips for Talking to your Fiancé About Money - Guest Post

Guest Poster — Fri, 26 Jun 2009 11:00:58 +0000

Micah & I are headed off to a wedding this weekend, so here’s an appropriate guest post with 7 tips for talking to your fiancé(e) about money. I advise couples to start talking early, because you’ll form your own ideas of your marital finances and they may differ greatly.

Money is one of the biggest things that couples fight about. Many of those fights come about because a lot of us just don’t know how to talk about money. Financial issues are going to be a topic of discussion throughout your entire marriage. Because of this, you should learn to talk to your partner about money even before you tie the knot.

Some tips that you should follow for talking about money with your fiancé include:

Figure out how you feel about money. Many of the fights we have with our partners about money really have to do with our own mixed-up feelings about the topic. Many people get frustrated, overwhelmed and defensive when trying to figure out finances. Get right with your own feelings about money and you’ll be in a much better position to discuss the topic with others.
Always know what you want before you start talking about money. You might be interested in discussing how much you should spend on the wedding. Or maybe you want to talk about long-term financial plans. Whatever the topic of discussion, decide what you want before you start talking. If you don’t know what you want then you can’t discuss the situation reasonably enough to make a compromise.
Stay calm. If you feel yourself getting upset while discussing money issues with your fiancé, it’s time to take a break. Most couples get stuck in arguments about money because they don’t know how to step back, re-assess what they want to say and then start over calmly.
Be honest. You might be surprised how many people don’t know about the debt that their soon-to-be-spouse is carrying. Be honest about this issue as well as about any other money topics that you discuss. You’ll save yourself a lot of trouble later even if being honest is difficult now.
Make some rules. Who will be responsible for the bills getting paid on time? Will you each be spending your own money or will you be discussing all purchases before making them? Figure out some ground rules before you get married.
Create some shared financial goals. Figure out what’s important to you when it comes to money. Find out what’s important to your fiancé. Come up with some goals that you can work towards. This will help you to feel like you’re on the same team when it comes to money instead of battling each other over it.
Make a commitment to not let money get between you. Before you even have your wedding ceremony, you may want to have a private ceremony in which the two of you make this type of commitment. Write it down and seal it with a kiss. This can really help put you on track to being kind to each other about money over the years.

The most important thing is that you open up those doors of communication now. Don’t avoid talking about money just because your relationship is still relatively new. Starting to discuss it now is what will help your marriage last through all of the money issues that arise over a lifetime.

Guest post by Kathryn Vercillo. Kathryn is a writer for Promotionalcodes.org.uk which gives away free voucher codes (like this Vodafone promotional code) and also publishes money saving tips.

Content © Mrs. Micah 2007 - 2009. This content may only be reproduced in excerpts by legitimate bloggers.

Keep Your Word to Children About Money

mrsmicah — Wed, 24 Jun 2009 11:00:35 +0000

When I was much younger, about 10-years-old, my younger sister and I created our own little business. We called it a Paper and Mail Service and had a little rhyme that we wrote on our fliers, “We get your paper and mail each day while you’re away.”

It wasn’t a huge source of income since we didn’t market it outside our little neighborhood. But it helped us save up for periodic purchases of fun stuff like walkie-talkies and used books and it made us feel useful.

Our business lasted a couple years and for the most part I’d consider it a success. There’s still one incident, however, which stands out in my mind in stark contrast to the warm fuzzies I feel about the whole endeavor.

It was a pretty easy job, but a drawn-out one. Our neighbors directly across the street were embarking on a long tour of the British Isles. I can’t remember now exactly how long they were away, but I know it was a minimum of two weeks. I also remember expecting that they would pay us $10 each. I’m pretty sure this is what we’d worked out ahead of time.

By the time they got back, we’d each made plans for how we’d spend the money. I believe mine involved the used book store–$10 would buy at least 3 new used books!

The neighbors arrived home and came to pick up their papers & mail the next day. They told us that they had a special surprise for us. Oh yay, payment and souvenirs!? More money? No wait what? Tartan beret coin purses?

Tartan beret coin purses?!!!!!

Tartan coin purses, round and flat like berets, little pompoms on top. That was it. I’d post you a picture if I could find mine–I’ve carried it everywhere I’ve lived but can’t find it now that I actually want it for something. My sister’s has disintegrated from getting more use than mine did.

So back to tartan beret coin purses. If you ever renege on giving a child money, for the love of all that is holy do not give them a purse, wallet, coin purse, or any other reminder that they don’t have money. It was a cute coin purse and I would have appreciated it, had it not symbolized the loss of books.

It was a huge disappointment and a blow to our entreprenerial spirit. I felt utterly betrayed in the way that only a 10-year-old can feel betrayed. I shed a few tears on my own, though I was composed enough to thank them for thinking of me. It made me feel bitter about the work we’d done and for a while I mistrusted adults & customers.

It’s been about 13 years since the incident. I got over it. It hasn’t eaten me up inside, it didn’t warp my view of adults or money or work. Every once in a while, I find myself thinking “Tartan beret coin purses? WTF?”

When I do think about it, it makes me resolve one thing. If I ever hire a child or teen to help me around the house, pick up my paper & mail, or do anything, I will not assume that I can replace their promised payment (be it money or something else) with something I think is better.

As an adult, I have enough self-confidence to assert my need for the agreed-upon amount. I’ve even had to do that with clients who don’t pay up–it’s not fun, but I know where I stand. A child or even a teen does not stand as your equal in terms of social or financial power. And, as the cliché teaches us, with power comes responsibility. Use yours right and help children have positive financial experiences.

Content © Mrs. Micah 2007 - 2009. This content may only be reproduced in excerpts by legitimate bloggers.

Surviving Freelancing

mrsmicah — Mon, 22 Jun 2009 11:00:22 +0000

Though I started working full-time 6 months ago in December, I have maintained my consulting business and continued working on the side. In many ways, this has been fulfilling–I often enjoy the work, the money aids in getting out of debt. I’ve recently come to see something bad happening underneath all that. I’ve been getting frequent migraines, having trouble sleeping, and feeling constantly as though I’m overwhelmed by everything around me. I’ve also been slipping into a more depressed place for longer periods.

On Sunday, I asked Micah “Do you think I work too much?” His response:

I think you work way too much. I think you work like there’s something more important than your emotional health or your sanity. I think you’re working like you think we’ll starve in the gutter if we turn down a job.

Ah. That made far more sense than I wanted to let myself believe. Just the day before had been asked by a friend & client via Twitter:

You ever relax? You seem to go 110% all week long.

I do. I put in at least 60 hours a week - days, nights, & weekends - maybe more. Yet I know perfectly well that we won’t starve in the gutter if I don’t do any freelancing at all and earn nothing from my blog. We wouldn’t even have to start living on ramen. So what was this coming from?

After talking with Micah about it, I concluded that I’m approaching freelancing with the same attitude I had last year, when it really did make a difference. It’s not bad to always be on the lookout for work if you’re a full-time or most-time freelancer. That’s part of the job. But when I’m already working 40 hours a week, it’s a problem.

My mind had never gotten off the work = survival track, or had never let on to the 40 hours a week that I was already doing. It was telling me that if I didn’t try to keep up with the rate I’d been doing before, then I’d fail, end up in the streets, and starve.

But it’s not true. Instead of being helpful and keeping me working, this once-helpful mental track is driving me off the edge (some days).

So, what do I do?

I asked Micah to help me make a realistic plan, since my own judgment of a healthy amount of work is obviously not quite there.

We both sensed that it worsened around the time Micah stopped teaching for the summer, which led me to feel like I had to earn more, even though we’d planned for this. So the first part of the plan was to spend some time talking through the facts of our financial situation. We’re prepared and Micah has a contract to teach in the fall - he’ll even be earning more than this year. I plan to journal about this, as something to help me whenever I start to feel this solo-earner panic again.

Concrete steps I’m going to take include:

1) Cutting back on blogging here to 3 days a week. This will start as a summer thing and we’ll see how it goes. I’d already cut back on my blogging as a way to regain control, and 3 posts a week should mean better material for my readers.

2) Taking a temporary break from consulting altogether. I’ll be taking this break from now through the end of July. I want to re-assess my goals (for consulting, for my library career, and for my hobbies). I may help out some of my long-time clients, as long as it’s not a huge project.

3) For now, I’m going to run projects by Micah before I accept them. I’ll provide a written or oral assessment of exactly what’s involved, a history of how I’ve done or not done this before, and estimates of how long it’s going to take. Telling him is mostly for my benefit, as I’ll still be the one who decides whether or not I take a gig, but I think it’ll help a great deal to have someone to process it with.

I’m hoping that this will bring me greater fulfillment in my freelancing and blogging as well as in the rest of my life.

Content © Mrs. Micah 2007 - 2009. This content may only be reproduced in excerpts by legitimate bloggers.

Wisebread Book Review & Giveaway

mrsmicah — Thu, 18 Jun 2009 11:00:50 +0000

Wisebread, one of the better-known group personal finance blogs, recently published a book called 10,001 Ways to Live Large on a Small Budget. Though I got an advance copy, it’s taken me a while to read it. There’s an excellent reason why–this book is not something to be read all in one sitting. Instead, it is like an updated, organized Tightwad’s Gazette (also a good book).

Or, more accurately, it’s like a combination of every good money-saving blog post you’ve ever seen written on the internet.

Why is the book worth purchasing or winning or reading if all the information is available online?

There are two reasons why I think the book is worth having in your collection–at least if you’re always looking for frugal reference. 1) 10,001 Ways to Live Large on a Small Budget is very well-crafted and detailed. Its sections come from the WiseBread writers and beyond. 2) It’s an inspiring book.

1) Craft & Detail

While you may be able to find dozens of articles on each topic online, the ones included in Wisebread’s book come from a diverse spectrum of writers, all of whom put their best into (re)writing them. This means diverse ideas and experiences come into play. It also means that you don’t have to click through a number of search results to find one that’s well-written and interesting.

2) Inspiration.

Having the book around as a reference can inspire you to save money in new ways. Maybe you hadn’t intended to start canning and would never have clicked on a canning article online. However when flipping past the canning article (there is one), you notice something interesting and start reading.

Unlike an RSS feed, it’s all available at once when you’re scanning through the book or reading the table of contents. Daily inspiration is valuable too, but there’s something useful about the ready-to-hand-ness of this book.

Both of these advantages can be found in high-quality blogs, but they’re things that this book does well and all at once.

Why you might not want to buy 10,001 Ways to Live Large on a Small Budget

Just as you find them in all blog posts on saving money, some of the suggestions in the book are the same ones that those of us who know anything about personal finance and frugality have heard a million times over. I don’t think they should have been left out, as there will probably be people purchasing the book who’ve never heard or thought of them as options before.

It feels insipid, but it’s something you can overcome unless you really have read every money-saving blog post ever. Because it’s not a book you need to read straight through and it’s well-organized and indexed, you can find the info you’re interested in without ever reading the other stuff.

How you can win 10,001 Ways to Live Large on a Small Budget

Courtesy of the fine people at Wisebread, I’m giving away two copies of the book. The contest opens today and ends on Wednesday the 24th at 10pm EST. I’ll send the names & e-mail addresses to my Wisebread contact, who will be mailing the books.

To win, answer the following question in a comment:

If you were contributing to this book, what one tip or set of tips would you include?

Void where prohibited. Winners will be chosen by random.org. Entries will be considered valid at my own discretion. Must use valid e-mail address to win so you can be contacted, otherwise someone else will be chosen.

Updating Real Earnings Analysis

mrsmicah — Tue, 16 Jun 2009 11:00:36 +0000

Last October, I wrote about my “real earnings” at the part-time hospital job. Since it was PRN (meaning “as needed”), I wasn’t able to come up with a real hourly wage, but I was able to figure out the basics of what I had to subtract. Now that I’ve been at my new job for 6 months, I thought I’d look back over my costs of working and see what’s changed.

The cost of commuting has slightly increased (though now I’m using SmartBenefits, which means it’s pre-tax) as I now have to commute at rush hour both ways. This comes to $3.90/day for the metro. Add in about $0.50 in gas to and from the metro station, or $0.45 each way if I’m taking the bus. This is less if Micah’s working, because then the trip is part of his commute and we can apply half to his cost of working.

The time cost has decreased a little, from 45 minutes each way to a little over a half-hour. As a plus, I spend 10 minutes of that each way walking, which is better for my health. Because I ride the metro/bus/car and then walk, I’m not going to count the time as a real cost. Instead, it gives me chances to sit in silence, read, talk with Micah, and then exercise. My commute is often good me-time.

In both cases, the wardrobe cost is about the same as I have a similar dress code–though I work more hours at this job than at my two part-time jobs, so the clothes probably get worn out faster. Perhaps after a year, I’ll have more of an idea of the cost.

While I’m eating lunch at work now, this hasn’t worked out into higher food costs as I always brown-bag. Because I’m no longer PRN, I may be eating fewer snacks to keep me going until I get home–though our grocery spending hasn’t really changed.

All in all, my real earnings have skyrocketed because I am always getting 8 hours of work to make up for the costs, instead of 1 or 4 or 5, and the costs have stayed about the same. Has it cut into my ability to earn money on the side? A little, but I find that I’m enjoying the consulting far more now that I’m not trying to make it a main staple of income that makes up for my earnings at the other jobs.

Have you looked at the real earnings of your job? Is the cost of working there worthwhile? Are there ways you can cut down on that cost?

Dell Extended Warranty Pays off With Replacement Laptop

mrsmicah — Mon, 15 Jun 2009 11:00:20 +0000

This is a post is from my younger sister. She was so excited about the good customer service she got from Dell that I asked her to write about it for my blog.

Yesterday, I got a free Dell laptop.

No, it wasn’t from one of the plethora of scammy advertisements which riddle the internet claiming that you’ve won a free laptop–if you just fill out eight gazillion survey forms and trial offers which ensure that you’ll receive infinite amounts of junk mailings while never actually getting your computer.

Instead, I got my new (refurbished) laptop because of the warranty I had bought four years ago. My university only allowed laptops bought through their laptop program to connect to the internet. Annoying, yes, but it ensured that everyone had Microsoft Office, full antivirus protection–and a complete Dell four year Next Day Service warranty.

At first, I thought spending ~$200-300 on the warranty was a waste of money, since warranties quite often are. In 2006, Consumer Reports strongly recommended against getting extended warranties for most products. As they pointed out, in many cases, you’re just wasting money. After all, the companies are very careful to offer warranties which last only until the product typically starts to deteriorate; otherwise, it wouldn’t be worth it for the company. Instead, Consumer Reports recommended that consumers simply buy good products which operate smoothly long after any warranty would have expired.

Sounds simple, but there are two problems with that recommendation:

1. Sometimes you can’t get a good or reliable product.

In my case, I had to buy the school laptop. I already owned my own Dell laptop, which had functioned reasonably well for about two years at that point, but I couldn’t connect it to the school’s network or internet. The school was more concerned with providing a cheap and semi-reliable product than with providing a long-lasting and stable product. Other consumers may have to choose a cheaper product rather than a better product because they’ve got limited budgets.

And I can assure you, my laptop was anything but reliable. As far as I can remember, over the last four years, I have had Dell replace the motherboard (twice), hard drive, keyboard (twice), screen (twice), mouse pad, power cord (thrice), and battery. ["Holy crap!" interjects Mrs. Micah.] Essentially, I had my entire computer rebuilt over the last four years. I never spent a dime beyond the initial warranty purchase.

All this, without much disruption to my life–which brings me to my second point:

2. Sometimes you need the service which warranties guarantee you.

When I was in college, if I didn’t get my computer repaired asap, I might not be able to complete a critical project or make a vital presentation. I imagine it’s the same for most workplaces and freelance operations: you need access to your computer (or other essential item), and you need it now.

Dell’s warranty guaranteed not only part replacement but on-site technicians to install it. What did that mean? It meant that my computer was generally repaired on my dining room table! After I’d diagnosed my computer by chatting (online or on the phone) with Dell, the local Dell-approved repair company would call me, set up an appointment, then bring the part to my home and install it right there. At no point was I without my computer, and at no point did I risk losing it in the mail/service center.

Even now, only about a month before my warranty runs out, Dell was so helpful that, as my service needs piled up, they actually sprung for a full computer replacement. I even got an upgrade, since they don’t make my old computer anymore! And all this for a comparatively small warranty investment (~$200-300) when I bought the computer. My warranty has saved me hundreds if not thousands of dollars, for parts, service, and now an entire computer.

So Should You Buy an Extended Warranty?

Does my story mean you should always invest in a warranty? Absolutely not. For example, in my experience (though I’m certainly no expert), cameras tend to be stable enough to function until the warranty is expired or the camera itself is so out of date that it’s worthless to repair. Many other good big-ticket items are similar, especially if you take the time to peruse reviews and check sources like Consumer Reports or the Blue Book.

What this does mean is that you should seriously consider warranties. I strongly recommend a full 4-year service and parts replacement warranty for all college students, but any computer purchaser would likely benefit from a warranty–especially if they buy a mid- or low-range laptop. In the end, it can save you a great deal of time, money, and worry.

And, most importantly of all, it means that you should take full advantage of your warranty. Every time something went wrong with my computer, I contacted Dell. Within days, it was fixed, and my computer was working perfectly. Unlike many of my friends, I had no problem contacting Dell and demanding (nicely) that they live up to their contract. Once you enter into a warranty like this one, it’s your responsibility to ensure you get your money’s worth!