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This Week In Your Wallet: The Tip Of The Iceberg 

Jean Chatzky  |  September 17, 2019

Picture it: You’re at a coffee shop or juice bar or sandwich shop or any other “grab and go” retailer where you won’t be seated, but you will be taking a consumable for the road. You’ve just inserted your card into the point-of-sale system, and before you can even pop it back into your wallet, you’re confronted with a whole new option — to tip, or not to tip. Some touch screens prompt tipping based on the percentage of the total bill —20%, say — while others offer dollar amounts — $1, $3, even $5. What’s a patron to do, particularly if the service has been friendly, and your order has been more involved than simply pouring brown liquid into a cup? Turns out there are as many perspectives on counter service tipping as there are ways to order your coffee, according to a piece by Seth Kugel in this week’s New York Times. Some people tip at places they frequent. Others only tip if their order is complex, or if the service is exceptional — but how exceptional can it really get with interactions so limited? There’s currently no standard tipping etiquette for counter service, and Americans are pretty divided — 24% say they always tip baristas, while 27% never tip, according to a recent survey from CreditCards.com.  For me? It’s a gut decision. Sometimes I do it, sometimes I don’t. Sometimes the fact that the prompts for tipping start at 20% and escalate to 25%, then 30% annoy me, and I type in my own number. Sometimes I remember that minimum wage isn’t nearly enough, and I just click. I’d love to hear from all of you on this — I’ll start a thread on our private HerMoney facebook group.

Everything Old Is New Again

Remember five-ish years ago when the advice to anyone and everyone buying a car was “Whatever you do, buy new”? Well, that guidance has once again flipped on its head, and used car buyers stand to save a bundle — more than $14,400, on average, by buying a three-year-old car, according to a piece this week in the New York Times. The average transaction price for a new car now stands at around $37,000, compared with $23,000 for a used ride. Why? Well one of the reasons is there’s an especially large supply of gently used cars on the market, thanks to the expiration of leases, which typically run for 24 or 36 months. These cars are young enough to have all the latest bells and whistles and back-up cameras, but old enough that they’ve sufficiently depreciated into “good deal” territory. A few caveats, though — the average interest rate for used cars hovers around 10%, compared to 6% for new, according to Experian. But, borrowers with good credit always pay lower rates. Of course the cheapest way to buy any kind of car is to pay with cash up front, which 44% of used car buyers actually did in the second quarter. (I’ll admit, I was surprised. And impressed!) But if you have to finance, make that down payment is as substantial as you can afford, and the term of the loan as short as you can manage — the longer the term, the more you’ll pay in interest over the life of the loan. Lastly, always always review a used car’s history via services like Carfax or AutoCheck, which can reveal any red flags — like a wreck that may have left a major problem hidden just underneath your new-to-you car’s shiny exterior. 

Phasing Out 

I hear of the “traditional retirement” — which generally involved some combination of waltzing out of the workforce at 62 with a gold watch, a pension, and a party with various off-color plaques and jokes presented — so rarely these days, I think it’s safe to say that no one is expecting to find anything like it when their working days are done. And that’s if you expect your working days to ever be “done,” in the traditional sense. Many of us are now negotiating with our employers for a “phased retirement,” writes Glenn Ruffenach in this week’s Wall Street Journal, one in which we pull back slowly from our working years, and help ease the transition for the company and our fellow employees. While many employers don’t formally offer a phased retirement track per se, companies that have made such arrangements with employees have found it helpful with succession planning, retention of talent, and (not surprisingly) the passing on of institutional knowledge. If it sounds like it might be something you’d like to try, the instruction is simple: Just ask your employer if you can try it. Many managers are open to the possibility, particularly if you highlight the benefits for them. Some of the more persuasive talking points include: A reduced schedule means a reduced paycheck. They can call it “phasing out,” “consulting,” or “part-time” work — whatever floats their boat. It makes no difference to you. Also, you can help mentor and train new people in your job or department, because who knows the ropes better than you? Lastly, we can’t think of any managers who like surprises — letting them know that you’ll be retiring in a year or two should be far preferable to a months-long notice. 

Priorities, Priorities… 

To those of you who have been putting off paying down your student loans in favor of investing, it’s time to take a hard look in the mirror and make sure you’re actually getting around to the latter part of that equation — the investing part. Yes, it’s true that the earlier you can get your money in the stock market, the better off you’ll be come retirement, thanks to compound interest. And yes, it’s true that channeling some of the money you might have spent on student debt into wise market investments can eventually yield a big payoff… But as Michelle Singletary writes in this week’s Washington Post, many people are only internalizing part of that advice — the part that emphasizes that it’s okay to delay repayment of student loans. “In their minds, they have been given permission simply to make the minimum payments on their loans, and they feel freed from concerns about carrying the debt for decades.” So instead of playing the market as we said we would, we buy new cars. We take vacations. We plan a wedding. Then we have a child. And, the next thing we know, we’re headed into retirement dragging that albatross of student debt right along with us.  Singletary writes: We’d be better off spending our 20’s aggressively attacking student debt, and then our 30’s investing all we can into our workplace retirement accounts. I’d add to that — the most important thing is to really know yourself and monitor your own behavior. If you will take those added student loan payments and funnel them into investments for your future rather than enjoyment for the present, then do it. If not, paying down debt is indeed the smarter way to go. 

With Care

Finally, for all you caregivers in the midst, I had the privilege of being asked to moderate a panel at AARP’s summit on The Price Of Family Caregiving which you can now watch online. My session (on Caregivers As Consumers) comes in toward the end (at the 2 hour, 40 minute mark), but I have to say the whole thing is worth a look. Rep Debbie Dingell (D-MI), who talked candidly about taking care of her husband Rep. John Dingell (D-MI), who died in February, is my new hero. Her session comes in right after the intro.

Have a great week, 

Jean 


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