Family Finance: Why Amazon Prime?

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Hello friends. It’s me again, here with your second dose of family finance for the new year. In the first post, I covered the very basics of budgeting and how to go about calculating a realistic budget based on your expenses. In the next few posts, I  will be discussing how we save money shopping by using subscription services like Amazon Prime and Costco’s Executive Membership. Today’s post will be specifically about Amazon Prime, a service that we have used for years and are well acquainted with. I am aware that there are pros and cons to each service that we recommend and I will try my best to address these today and in the upcoming posts.

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What is Amazon Prime in a nutshell?
Amazon Prime is an online shopping subscription service for $99/year that gives you access to 2-day delivery guarantee on Prime items. On top of the free 2-day delivery (nothing is free, I am sure the accountants have it all calculated in your prime pricing) it also gives you access to Amazon Photo, Amazon Video, Twitch and other Amazon owned subsidiary services. What Amazon does is that it spares you (both time and money) from having to hop in your car and drive to a number of different stores to purchase the goods that you need; everything from clothing to food to office supplies to home tools and appliances. You name it and it’s most likely on Amazon.

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Although we don’t have Amazon Fresh where we live in Michigan, I am hopeful that with their acquisition of Whole Foods it will soon become a reality. Amazon Fresh is a service that has a contractor buy groceries per your request and deliver it straight to your door in a matter of hours. Yes, we are moving towards the future we saw in WALL-E (if you haven’t seen WALL-E, do me a favor and watch it. It’s one of Pixar’s masterpieces). My wife is adamant that even with Amazon Fresh she will still prefer going to the local grocer or farmer’s market, I guess we will just have to see about that. Until we get Amazon Fresh, we are currently making the most of the Subscribe & Save feature of our membership.

Subscribe & Save
As homeowners and parents, we take advantage of Amazon’s Subscribe and Save feature to receive items that we use regularly at home on a monthly basis at a discounted rate. The way it works is that there are items on Amazon you can subscribe to (these could be anything from cleaning products to personal care products to snacks). If you subscribe to less than 5 items you get 5% off the price of those items at checkout and if you subscribe to 5 or more items, you get 15-20% off those items.

Screen Shot 2018-01-28 at 6.57.17 AMAlthough you only get one subscription box a month, you have the option of changing the delivery date and the contents of your box to fit your needs. On top of the discounts received, you can get an additional 5% off in the form of Amazon points to use towards future purchases if you pay with an Amazon Prime Rewards Visa Card. Below is an example of what our Subscribe & Save looks like. Notice how on the left there are 5 bars highlighted in orange. This means that since we have 5 or more items in our subscription box, we are eligible for the extra 15-20% off.

Screen Shot 2018-01-27 at 11.54.02 PMSample list:
Tom’s of Maine Toothpaste
Mrs. Meyers Hand Soap
ECOS Natural Dishwashing Liquid 
Peter Rabbit Organics Puree
Larabar Fruit and Nut Bar

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Amazon Prime Video
We don’t have cable because we don’t watch TV that often and we also HATE commercials with a passion. Amazon Video is a wonderful feature of our Amazon Prime membership (think like Netflix) with an extensive library that includes plenty of educational and family-friendly content for our Friday movie nights. If you decide on a Prime membership, Prime Video is automatically included but you can also sign up for Prime Video as a standalone service.

Screen Shot 2018-01-28 at 7.14.53 AM.pngAmazon Prime Pantry
The introduction of Prime Pantry allowed Amazon to expand its selection and offer thousands of items to Prime members that are cost prohibitive to ship for free individually. Since the items are smaller, individually shipping them isn’t an option, but if you fill a box worth of all your needs you can save substantially and also get Prime Pantry credit to use towards future Prime Pantry purchases. We don’t currently use this feature as we do most of our shopping at local grocery stores and Costco but it’s definitely something we are exploring because the pricing is competitive, it’s a real time saver once set up, and we can save an extra 5% by using our Amazon Prime Rewards credit card.

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Now you have an idea of what Amazon Prime is and how it works but the real question is: is it really worth it? What I have discussed up until this point, is just the surface of Amazon’s services. I haven’t even mentioned perks like your choice of a free kindle book every month or access to ad-free listening via Amazon Music or unlimited media storage through Amazon Photo. If I truly wanted to dissect each feature, this would turn into a VERY lengthy post so for the purposes of sticking to the topic, I will next address how a Prime membership can be an asset to managing your family’s finances and keeping to a budget.

Amazon Prime Memberships
In terms of types of Amazon Prime memberships, there are three different options: 1) Standard, 2) Family, and 3) Student. Below I’ve listed the three memberships along with links to their 30-day Free Trial if you’re interested in giving them a try. We currently have a standard membership but we suggest that if you’re a parent and you don’t cloth diaper that you sign up with Amazon Family as they offer discounts on many baby-related products including up to 20% off on  disposable diapers.

  1. Standard: Try Amazon Prime 30-Day Free Trial
  2. Family: Try Amazon Family 30-Day Free Trial 
  3. Student: Try Amazon Prime 50% Off For Students 

If you want to experience Amazon before diving into a membership or free trial and you’re either getting married or having a baby, I highly recommend you do your gift registry through Amazon. You get all the benefits of their customer service, everything delivered to your home,  and on top of it you get a coupon to purchase any remaining items off your list. If you have your baby registry with Amazon and you are a Prime member, however, you get additional perks including a $35 welcome box.

  1. Create a Amazon Wedding Registry
  2. Create a Amazon Baby Registry

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Why Amazon?
Okay, so Amazon Prime is awesome.  It saves you money by saving you time with its 2-day shipping, competitive pricing, and diverse selection of products. But you’re probably asking how does this translate in terms of numbers? To illustrate how the membership pays for itself, I’m going to share a few ways we save big using Amazon Prime.

Gifts.
Between holidays, birthdays, and just because, we do most of our gift shopping via Amazon Prime. I’m talking 50 gifts a year, at least (yeah, we are blessed with family and friends). If we were to pay 2-day shipping for even just 10 of those gifts, we would easily spend the $100 that our membership costs. Assuming shipping is around $10 (depending on box size and location this can vary from $7-$20+) on average (I just sent a small box to a city 30 minutes away and it was $8 for standard shipping), we save at least $400 a year not paying for shipping when we gift.

School books.
 If you’re a student like us, you know that the cost of books can add up FAST. Not only are Amazon’s book prices consistently low compared to other retailers but on shipping alone, we definitely save big with a Prime membership. Since we first started using Amazon we’ve had over 100 book orders, and while it would take entirely too much time to calculate how much we saved going with Amazon as opposed to our university’s Barnes and Nobles, we definitely saved at least $500 on just shipping alone. On top of that we were able to sell our books back via Amazon Marketplace for much more than we would have received from our university bookstore. The bottom line is if you’re a student then you should seriously consider getting Amazon Prime (the membership is only $50/year for students).

Household.
From dishwasher detergent to a router, we have saved a great deal over the years going with Amazon for our household needs. We have purchased a rug for the nursery, a projector for our home theater system, and even our bikes from Amazon. For all of these items we were able to do extensive comparisons of pricing, customer reviews, and warranties to ensure that we were getting the most bang for our buck. Just to give you an idea, one of the rugs we ordered was $100 more at places like Walmart  and Home Depot and the projector we purchased was $200 more at Best Buy.

Baby.
Amazon has a diverse selection of products that we would not have had access to if we went to our local baby stores, especially with our choice to cloth diaper. We were able to get a variety of quality cloth diapers for a fraction of the cost ($26 for 6 as opposed to $15-20 each) as well as significant discounts on products such as strollers, baby proofing essentials and bilingual toys and books.

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Is Amazon Prime guaranteed to save you money and lower your bills? Not necessarily  but it certainly can if you play your cards right. I like to think of Amazon as a tool or technology that can be used either for good or bad. Amazon Prime often gets a bad rap as an enabler of mismanagement because of its effortless accessibility and it’s not hard to see why. I do think, however, that if you have a busy lifestyle and if you spend regularly on some of the things I listed then you can definitely use Amazon Prime to your advantage when budgeting and saving money. If you took the steps I suggested in the first post to create a budget, the best way to know if Amazon is right for you is to do some research on your expenses and determine whether you can cut costs with a Prime membership. In the next post we will introduce the other players that compete with Amazon and why we use a combination of services instead of solely using Amazon Prime.

If you found this post helpful, we would appreciate it if you like and share it.  If you  are an Amazon Prime member and have something to add to the conversation or you’re considering Prime and have more specific questions about their services and pricing, feel free to comment/ask below. We always love hearing from our readers 🙂 And as always… signature3

 

 

Family Finance: A Simple Budget Overview

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Hello friends! Today’s post is going be different than the usual and it might even seem a little off topic because it’s about numbers (my favorite subject). As a financial analyst, budgeting is a subject near and dear to my heart and something I have been wanting to write about for a while now. While it doesn’t fit the usual cozy home posts of DIY projects and healthy recipes, it is something that is essential to the kind of lifestyle we write about. Sound budgeting not only reduces stress but it is absolutely necessary for eating healthy, saving for the future, and investing in quality experiences (just to name a few).

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Although life is busy with two kids and endless responsibilities, I try to make sure that my wife and I are on the same page when it comes to our finances. While talking about money sometimes gets a bad rap in certain cultures (it can be taken for stinginess or greed) the reality is that money is an important aspect of life that, when managed properly, can be a real source of strength for your family.  With the New Year just around the corner, I wanted to write a series of posts that would be helpful for those looking to review and improve their financial stability by acquainting them with some basic concepts, tools, and resources to budget better, save more, and stress less. In this first post, I will discuss a simple approach to budgeting that will involve choosing a methodology for budgeting and tracking that is comfortable and realistic for you and your lifestyle. Let’s get started!

Agenda

  • Choose a methodology for budgeting that is realistic
  • Find and maximize your budgeting strategy to free up time for other activities
  • Help you commit to a new financial awareness

1. Cash vs. Credit: Choose a spending system
There are many blogs and websites out there that tout the merits of using cash-only while vilifying credit cards as enablers of mismanagement. While there is some truth to this, there are many benefits to using credit cards especially when used alongside online budgeting platforms. I am a firm believer of using a hybrid system and as of right now we have an 80/20 split between credit and cash respectively. Choosing a system is important because it will dictate how you track your numbers.  For example, if you decide to use mostly credit like we do, along with an online budgeting platform, much of the work in terms of tracking numbers will be done for you automatically. Another benefit of using credit is being able to take advantage of cash-back or point bonus systems that many well-known credit card companies offer. While your budget will dictate to some extent what your spending system will look like, it’s important to envision how you’re comfortable spending so you can get into a rhythm that works for your lifestyle and fits into tracking and accountability.

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2. Written vs. Digital: Tracking your numbers
Aside from choosing a spending system, it’s also important to pick your preference when it comes to keeping track of your income and expenses. There are many budgeting apps and free online software’s such as Mint, YNAB, Google Sheets, and Microsoft Excel to name a few. I use Excel because I always have but if I didn’t have access to it then Google Sheets would be a more than capable replacement. If you can’t see yourself committing to updating a sheet every day or two on the computer then stick to good old pen and paper (you can find PDF expense trackers here). If you’re not into tracking at all then you might want to really consider an online system like MINT or YNAB. All you need to sign up is a valid e-mail address and the rest is simply adding your financial account information.  Mint is a free platform while YNAB is free for some people such as college students (more on their pricing structure here). The most important thing is that you choose a medium that is comfortable for you so that you can be consistent and disciplined.

Now that you have an idea of what kind of spending system you’d like and how you want to keep track of your numbers, let’s do a very basic run through of how to calculate a budget.

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3. Fixed vs. Variable Expenses: Determining your Budget

Fixed expenses: A fixed expense is one that you can’t change and tends to stay around the same dollar amount every month. Mortgage payments, apartment rent, and car lease payments are all examples of fixed expenses.

Variable expenses: A variable expense is something that changes from month to month based on different factors. Groceries, clothing, entertainment, and gifts would be examples of variable expenses because you decide how much to spend to some degree.

To determine your monthly budget, you will need to calculate your expenses (fixed + variable) and subtract them from your monthly income. I have provided a sample Excel  sheet template below for downloading to show you how this is done. As you can see, there are three sections: income, fixed expenses, and variable expenses. If you want to follow along using the custom budget template that I created, go ahead and start by inputting your  income first followed by your expenses. In this example, the income is $3500/month, total expenses are $2402, and there is a positive balance of $1098.

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You can adjust the expense categories to more accurately reflect your family’s lifestyle but I tried to include a diverse list of expenses to give you an idea of what to account for. If you’re totally clueless on what you’re spending on or even how much you spend on basic things like groceries, I suggest you try a 30-day trial period where you diligently track each and every expense. This will help acquaint you with your spending habits and allow you to identify practices that are not budget-friendly. For example, if your grocery expense is much higher than you’re comfortable with and you’d really like to be saving for say a post-graduation trip then you might want to adopt practices like meal planning and meal prepping to work alongside your budgeting approach. While you do want to be as accurate as possible when accounting for your spending, you don’t want to be too extreme to the point that you’re tracking every penny unless you are in a very tight situation. Once you’ve figured out you’re spending habits, created a budget, and have begun tracking your monthly expenses you are now able to do the fun part of analyzing your data and working towards saving and investing.

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Now with the basics down, it will be much easier for me to share some of my tips and tricks for saving monthly, planning trips, and investing in the future. I have a few posts planned out for this series already; one to cover college savings funds and another to cover the advantages of memberships like Amazon Prime and Costco. As I said early on in this post, finance is a subject that I am very passionate about so if there’s something you’d like to see covered in this series then please don’t hesitate to contact us either through email or by leaving a message in the comments below. We hope this post was the spark you needed to rethink your budget and saving strategies for 2018. As always, if you liked this post please follow us and share!

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