I was born and raised in New York and my family continues to live there today.  I no longer live in New York but I do visit a few times a year and when I do, I make sure I do as much of my clothing shopping as possible.  Why?  Because you can buy all the clothes you want (as long as it’s under $110 per piece) and not pay a single penny in taxes for it!  It really does pay to hold off on your shopping for the right tax free opportunity.

I urge you all to do this if you plan on visiting states that don’t tax clothing.  Here’s a list of states that don’t tax you on clothing.

Alaska – no sales tax.

Connecticut – no tax on clothing under $50.

Delaware – no sales tax.

Massachusetts – no tax on clothing under $175.

Minnesota – no tax on clothing.

New Hampshire – no sales tax.

New Jersey – no tax on clothing except fur.

New York – no tax on clothing under $110.

Oregon – no sales tax.

Pennsylvania – no tax on clothing.

Rhode Island – not tax on clothing.

If you don’t live in any of the above states, you might be lucky enough to live in a state that has tax free holidays every year. Here’s a list of states that offered tax free weeks/weekends in 2009.  Most of them are offered right before the fall school season in August.  The list I compiled is based on my online research.  Do make sure you find out what the dates are and whether your state will be participating in a tax holiday this year.

• Alabama
• Connecticut
• Georgia
• Iowa
• Louisiana
• Mississippi
• Missouri
• New Mexico
• North Carolina
• Oklahoma
• South Carolina
• Tennessee
• Texas
• Vermont
• Virginia
  

How does a household of 2 manage to spend so much money at Costco?  Well, like I said…we bought bedroom furniture off Costco.com.

After looking through our previous year’s expenses, I decided that upgrading my Costco membership was very much worth the extra $50 a year.  I plan on spending at least $2500 this year at Costco so that I can get my $50 cashback reward!  Here are great things about Costco and the Executive Membership benefits.

1.  High quality items at great prices. I try to be frugal but I will very rarely skimp on quality so I can save a few bucks.  I would much rather have a good quality shirt I can wear over and over again than a poor quality inexpensive shirt that will rip in the wash.

2. Easy to make back what you spend on membership. So you might think that spending $2500 a year for a 2 person household is ambitious.  I thought so too at first but now I know it’s not a stretch at all.  Costco sells just about everything you could ever need at home -household products, groceries, office products, electronics, sporting goods, cosmetics, pharmaceuticals….everything.  When you combine all these categories, do you spend a total of at least $2500 a year?  Probably.

3. Costco gas. Very very rarely do I ever find a gas station with gas that is cheaper than Costco gas.  Costco gas is usually .10 to .20 cents cheaper per gallon than other gas stations.

4. The food court. A gargantuan slice of pizza for 99 cents.  A hot dog and soda for $1.50.  These are 2 examples of very tasty food for very cheap.  I don’t recommend eating this everyday, but each weekend when my husband and I shop at Costco, we will have a filling lunch here for $2.49.

5.  Clothing. Ok, so if you are the fashionista type, maybe Costco is not for you.  But if you are looking for comfortable stylish clothing that will not go out of style in a few months, this is the place!  I got a Calvin Klein tunic sweater today for $19.99.  The hubby got a Nike golf fleece jacket for $26.99.  Not bad at all!  I also saw men’s Citizen jeans for under $100.  I consistently see great deals on fleeces and jackets at Costco.

6.  They have organic food and eco friendly products. No, you don’t need to go to Whole Foods if you want organic food.  I regularly buy my organic milk, organic orange juice (which btw is the best orange juice I have found in any store so far), organic rice and organic chicken from Costco.  They have many many more products which I occasionally buy too.  They also have lots of great health foods like pomegranate juice, fruit juices, Cliff bars, etc.  I’ve also seen eco friendly cleaning products and laundry detergent too which I have yet to use but will try one day.

7.  Free samples. OK so I usually steer clear of processed foods as much as possible but I will admit…there are days when I go to Costco on an empty stomach and am quite satisfied by the time I leave the warehouse.

8.  Revolving/seasonal products. If you go to Costco today, you will very likely find Halloween, Thanksgiving and Christmas decorations.  In January…I guarantee you’ll find something else.  I noticed that Costco will change around their products and have random items in their stores I have never seen before.  They’ll be there for a few weeks and then be replaced with another new and random item.  One week you’ll see golf clubs, the next week it’ll be a massage chair, then maybe a vanity and so on.  It keeps things exciting.

9.  Excellent customer service. It’s not a secret that you can return anything you bought and there will be no questions asked.  I have a friend who said he bought his SLR camera there then brought it back in the box a year later and traded it in for a newer model.  I’m not saying you should do this but its an example of good customer service.

10.  Costco.com. If you’ve never been to Costco.com, go now.  An enormous number of products, and reviews you can check before your purchases.

11. Coupons. I love coupons.  Every month members will get a new booklet containing several pages of coupons on popular products.  I look forward to receiving these coupons every month as they offer very good discounts (you can get Charmin toilet paper for almost the same price as the crappiest cheapest toilet paper at your local supermarket).

Things you should know as an Executive Member:

• The 2% cash back is on pre-tax amounts
• You won’t get cash back rewards for cigarettes, alcohol, gasoline, stamps, food courts, membership fees, costco travel, insurance services. But yes, you do get rewards for purchases made through Costco.com.  Click here to look at additional info on the costco site.
• At the end of your membership year, you will receive your cashback rewards in the form of reward certificates.  You can use these at the register at your local warehouse on merchandise only.
• The cap on your annual cashback reward is $500.  That means if you spend over $25,000 that year in Costco, you will still only receive $500 back.
• If you want to upgrade but you just paid for your gold star membership a few months ago, Costco will give you the upgrade at a prorated price.

….and if you are a die hard Costco fan…..

….then sign up for the American Express Costco True Earnings Card.

• no annual fee
• 3% cashback on dining and gas, 2% back on travel and 1% back on everything else.

This is actually a great deal especially for those of us who shop at Costco a lot, drive around a lot and eat out a lot!

Now, back to the Executive Membership.  If you do sign up for this membership, be sure that you are committed to spending that $2500.  I now buy all my household products and the majority of my groceries from Costco.  If there is anything out there that I plan on purchasing, I will check Costco.com before I make a purchase to see if it is available through them.  If you want to buy a plasma tv, a camera, a laptop, or any kind of electronic, I recommend getting it from Costco.  If you don’t like it, if it’s broken or you simply have buyer’s remorse, all you have to do is return it for a full refund.  I’m not so sure you can do the same when you buy an expensive gadget from Best Buy.

If you do sign up for the Executive Membership and decide you don’t want it anymore or realize you aren’t able to spend the $2500 to make up for the membership fee, all you have to do is cancel your executive membership and ask for your full refund.

Today is a very long awaited day for us.  My husband is receiving the second portion of his retention package!  So about a year ago, while his company was undergoing some changes, he was offered a monetary package for staying with the company another year.  We said sure, why not?  He got the first part of his package after staying 6 months, and today he received the 2nd half of his package. Each half was approximately $8k.

What did we do with the first package?  Well, if I break it down this is what happened to package #1.

• Trip to South America
• A nice piece of jewelry
• A down payment on a leased luxury car

I know.  What on earth were we thinking??  That was us back then.  Present day us is *hopefully* smarter than that.

I was looking forward to this second check because I wanted to get started in being avid savers again.  So what am I going to do with the money?  I’m dumping it all into ING to increase the size of our emergency fund.  That will hopefully put me at around $15k.    Having learned the hard way what not to do with retention packages/bonuses, I now know what the best things to do with bonuses would be.

1. Pay off non-mortgage debt.  Depending on what the interest rates are on your loans (and during these times they are most likely higher savings rates), I would pay off the highest rate loan you have first.
2. Contribute to your retirement accounts. Hopefully you are contributing the maximum into your 401k.  If not, get on it NOW.  The next best thing you can do is contribute to your Roth IRA accounts.  Max it out if you can.  Remember if you make over $166,000 as a married couple you are not eligible to contribute.  So if you are making under $166,000, make sure you contribute as much as you can especially if you expect to rise above the $166,000 cut off anytime soon.
3. Build your emergency fund. I don’t care if the economists say we are out of the recession now.  You can still lose your job, you can still get sick, you can still get in an accident and you can still lose a loved one.  Be prepared.
4. Invest. Now is a great time to invest.  If all your other areas (meaning retirement, emergency fund, etc.) have been getting enough attention, look into some stocks.  Now is a great time.
5. Charity. I’m a strong believer in karma.  If you are doing well right now, it’s a good idea to give back.

What I have learned NOT to do with my bonus:

• spend it on materialistic goods that don’t really offer much value (ie. luxury car, jewelry)
• spend it before I receive it (yes this is how we were able to plan the South America trip.  We anticipated the funding for it and went ahead on the trip before we got the money).
• spend every penny of it.

I think its a good idea to spend a little bit of your bonus just to celebrate or to reward yourself.  What I did with our last retention package was NOT smart.  This time around, I plan on saving most of it but have no problem going out to dinner with the husband for a nice quiet celebration.  We will of course be enjoying wine beforehand!

After tracking our expenses for about a year, I learned that we were spending approximately $600 a month on food.  It wasn’t so much the price of the dinners as it was the frequency of them.  On a bad month when we partook in fine dining, our dining expenses went as high as $1200.  But on most months it hovered around $600.  We were eating out 5-6 times a week.  He was occasionally going out for lunch too.

What is the true cost of $600 a month spent on dining?

Say instead, you only spend $200 on dining and put the remaining $400 into a savings account with ING.  That’s $4800 a year put into savings.  Now even if the interest rates were to stay at it’s sad current rate right now for the next 30 years,  this is what it would look like:

After 1 year:

Invested: $4800
Interest earned: $28.70
Total: $4828.70

After 5 years:

Invested: $24000
Interest earned: $783.32
Total: $24783.32

After 10 years:

Invested: $48,000
Interest earned: $3,230.12
Total: $51,230.12

After 30 years:

Invested: $144,000
Interest earned: $32,000.88
Total: $176,000.88

Now, putting it in a ING account with 1.3% interest is very conservative.  Chances are, the interest rates will go up.  Now say you put your money into a mutual fund and it generates about 6% of a return for you.  By cutting down on dining out, not only are you trimming your waistline but you’re growing your nest egg.  This is what 30 years with 6% will do for you.

Invested: $144,000
Interest earned: $257,806.02
Total: $401,806.02

The amount of interest you have earned is double the amount you have invested!  This is what you are missing out on when you choose to eat out so often!  True, eating out is fun…but is it worth almost half a million dollars to you?

How to Cut Down on the Cost of Eating Out

1) Learn to cook. Cooking can be therapeutic.  It can be fun.  It can be an activity that you do with your partner.  If you think it’s too much work to cook for just 2 people, you are wrong.  With just 30 minutes in the kitchen, you can make a mean lasagna that will feed the 2 of you for the next 2 days.  Go and pick up a cookbook (or better yet – search for free recipes online) and pick something out for dinner tonight.

2) Don’t be a pig. At most restaurants, an entree alone will give you 1,000 calories.  So is it really necessary to order an appetizer, side dishes and dessert too?  Stick with just the entree and don’t even think about soda.  Charging you $1.50 for a drink that is harmful to your health is not worth it.  Water is free and it’s so much better for you!

3) Save the alcohol for special occasions. Alcohol is the biggest rip when it comes to the food and hospitality industry.  I try to avoid alcohol unless we are out celebrating a special occasion.  If you have an absolute craving, go pick up a bottle of $10 wine and have some before dinner!

4) Learn to love hole in the wall restaurants. Some of the best restaurants are those that shun the fine dining atmosphere.  They are usually inexpensive, casual and have some of the best food in town.  I love using Yelp to find these types of restaurants.

5) Go ethnic. Like hole in the wall restaurants, many authentic “international” restaurants offer tasty meals at a great price.   In most cities, there is usually a Chinatown or International Boulevard where you can find good authentic eats for cheap.  My personal favorites are Vietnamese pho, taquerias, noodle houses, ramen shops, dim sum restaurants, and all you can eat Indian buffets.

6) Invest in tupperware and brown bag your lunch. My husband likes a nice warm hearty meal for dinner.  A typical warm hearty meal can usually feed about 4-6 people.  So what do I do?  Put the rest in containers and that’s lunch for the next day!

7) Use Restaurant.com. Go to Restaurant.com, type in your zip code and search for restaurants in your area that offer gift certificates that you can buy for just a fraction of the price (usually 20-30% of what it’s worth).  I have bought $25 gift certificates for just $2!  Be sure to read the fine print as some restaurants will require you to spend at least a certain amount or buy at least 2 entrees in order to use the gift certificates.

Buy cereal….or canned soup. I prefer not to eat a lot of processed foods but sometimes they come in handy if you are short on time or if you’re just plain tired and don’t have it in you to cook.  Cereal, tuna fish, canned soup, ramen are all good alternatives if you just don’t feel like really cooking.  I would lean more towards the tuna fish than the ramen for obvious reasons.

9) Go have lunch instead of dinner. If it’s the weekend and you’d like to have a meal out, opt for lunch.  Lunch menus are usually cheaper than dinner menus.  There’s also less of a crowd during lunch.

10) Check the menu before going out. Most restaurants will have their menus online so you can see what the prices are before you arrive at the restaurant.  Pick your food before you get there and vow to stick with it and you’re less likely to make an emotional (and expensive) impulse decision once you’re at the restaurant.

Cutting down on your dining out expenses can be rough and requires a lot of discipline…especially when you are accustomed to the dining out lifestyle.  But if I can manage to do it, anyone can.  The hardest part is usually the first month.  But once you get used to eating at home, it will seem like a special occasion to you when you go out to eat.  Now, my husband and I will go out to eat about once a week at an inexpensive restaurant (usually small ethnic hole in the walls) but we will occasionally splurge on our anniversary or birthdays.  The best thing about our efforts is not just the amount of money we have managed to save, but also the confidence we have now from knowing we are doing what’s best financially and knowing we are capable of relying on ourselves when it comes to cooking food!

It’s not a bad starting point.  But considering this is what we’ve accumulated as a double income couple who has been working for nearly 10 years, it’s not great either.  I do want to focus on our cash reserves.  I want to have about $50K in there for emergencies.  I don’t want to have to pull money out of our mutual funds or stocks at a loss if something happens and we need money.

As for reaching the $1 million goal…here is where I stand. 12% there….88% more to go!