The Thoughts and Musings of Tom Allain

If this is going to be a Christian nation that doesn't help the poor, either we have to pretend that Jesus was just as selfish as we are, or we've got to acknowledge that He commanded us to love the poor and serve the needy without condition and then admit that we just don't want to do it

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(b.1964)

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Archive for the ‘Money Chronicles’ Category

The Money Chronicles Volume 12: Managed Care is Often Unmanageable

Monday, May 18th, 2015

Last month Nancy’s father suffered a stroke. He’s 96 and in otherwise remarkable health and his recovery is optimistic. It’s been an emotional roller coaster that happens to nearly every family at one time or another, and God knows I’ve been witness to it thousands of times in my role as a hospice chaplain.

In the last four weeks I’ve also found there is a learning roller coaster to this. We purchase insurance for all sorts of things: our life, our homes, our cars. But we also buy insurance for our health and that’s an entirely different equation.

We buy car insurance in the hope that we’ll never need it. In the off chance we do need it, we’re pretty certain what it will do. If we wreck the car our insurance will fix or replace it. Case closed. Same with homeowner’s insurance.

But health insurance is a different animal altogether. It’s fairly expensive and most of us don’t pay the entire premium ourselves. Because of a series of random events, we expect our employers to pay the lion’s share and they do. Before the passage of the Affordable Care Act millions of Americans could not afford health insurance. If they got sick or injured they showed up in a hospital emergency room and made a horrible bargain: fix me and hope I can repay you.

If you couldn’t, it was a lose/lose situation. The hospital wouldn’t get reimbursed for the care they provided and sued the patient. The patient, who couldn’t pay, filed for bankruptcy and destroyed their ability to ever borrow money again. Result: the hospital needed to find another way to achieve financial solvency and the patient spent his life stuck in a cycle of poverty.

Bottom line: if you didn’t have insurance you owed whatever the hospital claimed you owed with almost no ability to negotiate.

But if you did have insurance you were gold. Your insurance company would pay for whatever happened to you. You may have a small copay but it’s at best a small percentage of the cost of caring for you.

And here’s what you didn’t know: your insurance company has the ability to negotiate how much they pay. They will pay less than the cost of caring for you because the hospital can recoup the difference with the individuals who can’t negotiate.

I’ve written this article because we received a bill from Scripps Memorial Hospital for Al’s stay there. He suffered his stroke on the evening of Saturday, April 18th. We brought him to the emergency room that evening where they admitted him. He stayed there until the afternoon of Wednesday, April 22nd.

We were pleased with his health and pleased with the staff and have nothing but nice things to say about the staff at Scripps Memorial. We weren’t sure how much it would cost but we all agreed it was worth it.

A few days ago we got the total. The total cost for his stay was $49,773.00 and the copay was $700.00. Truthfully, that seemed like a good deal for us. The copay was 1.4% of the bill. We were pleased with the insurance.

But there was another line in the bill. Turns out the insurance company didn’t pay $49,073.00. They paid $11,536.56. They have enough patients that they can play hardball with the hospital and negotiate a reduced rate.

In the end it pays off for everyone. The hospital is able to be profitable receiving $11,536.56 from the insurance company and $700.00 from Al (for a total of $12,236.56). Truthfully it’s a win/win/win. The hospital can live with a reimbursement of $12,236.56, the insurance company can afford to pay $11,536.56, and Al can afford to pay $700.00.

But for someone in the exact same position without insurance, they don’t have the option of paying $12,236.56. Their bill is $49,073.00 and the hospital expects every dime. If it’s not paid right away it goes to a collection agency. These patients and families are in an untenable situation: they are willing to pay whatever they can but they just can’t pay enough.

The passage of the Affordable Care Act provides health insurance for many who had been left outside. There are still those who gamble against needing health insurance but that number is much lower. To the extent that many candidates for the Republican nomination promise to repeal the Affordable Care Act, we can assume that they choose loose/loose over win/win/win.

As Al’s son in law I’m grateful to be part of the win/win/win.

The Money Chronicles Volume 11: Was This a Scam?

Sunday, October 19th, 2014

Nancy and I each drive a Toyota Prius. I bought mine in 2006 and she bought hers in 2011. A few days ago I got a call from Toyota asking if we wanted to trade in Nancy’s car. The teaser was this: they would sell us a comparable 2014 Prius at about the same monthly payment and we would get a car 3 years newer. I declined because Nancy is happy with her car and we’re looking forward to paying it off. But it got me wondering if this is a good deal or not.

This is where the math nerd in me kicks in. In the days following this I began to wonder if this would have been a good deal for us. Truth be told I’m a child of parents who grew up in the Great Depression and I still think of debt as a necessary evil. I’d be most happy if I didn’t have to pay off our home or our cars. Still I found it a fascinating question and I tried to crunch the numbers. It wasn’t easy because the auto world changes dramatically. The hot new feature of a few years ago is standard now. Think of anti-lock brakes and airbags.

Still, I started looking into the numbers. When we bought Nancy’s car in March of 2011 we paid $33,070.20 and financed the whole cost at 2.9% interest (her old car was so old we donated it to the San Diego Zoo). It was a five year loan with a monthly payment of $550.52.

Had we taken the offer we would get a comparable Prius for $30,930. It’s essentially a wash as the cost increased by only a little over $200. Interestingly enough the interest rate has decreased from 2.9% to 0.9%. Had we done this our payment would have been $527.42, a savings of $23.10 per month. At face value that sounds like a good idea: We pay less money each month for a newer car.

But wait: If we keep Nancy’s car we can pay it off in March 2016. But if we get this newer car we’ll be paying it until October 2019. That’s 3 1/2 years longer to have a car payment (assuming Nancy’s car lasts that long, and since my car is 8 1/2 years old and has nearly 189,000 miles on it, we can). What if we sell Nancy’s car now and use that money for a down payment on a 2014?

Glad you asked. The current blue book value of Nancy’s car is a little over $17,000. Let’s use that as a benchmark. OK, we sell Nancy’s car and use that as a down payment on a 2014. We still owe $9144 so we’ll need to deduct this. Our downpayment goes down to $7,856. If the car is $30,930 and we put down $7,856, the finance price goes down to $23,074. I’m not sure Toyota will finance this, but my Credit Union will finance the car for 1.99%. On a five year loan that makes our payment $404.34. By the way, if we did get the 0.99% rate from Toyota, our payment would decrease to $394.30

Thanks Toyota, but we think we’ll pass.

The Justice Chronicles Volume 14, The Money Chronicles Volume 10: Happy Birthday Federal Reserve

Tuesday, December 24th, 2013

Hallmark missed this, but yesterday was the 100th anniversary of the founding of the Federal Reserve, sometimes abbreviated as the Fed. The Federal Reserve is a confederation of 12 banks located around the country, and they are “the banks of last resort.” In other words, during times when the economy is in recession or doing poorly, banks can borrow money from the Federal Reserve to stay solvent.

This didn’t come out of nowhere. There’s an excellent article at NPR’s Planet Money blog. The article begins with the San Francisco Earthquake of 1906. Insurance companies in England were paying huge claims and so much money was leaving English banks that they clamped down the money flow to American banks. This led to some American banks failing, or not being able to pay their bills. Since there was no FDIC or bank insurance, any money deposited in those banks was lost.

If this wasn’t bad enough, people who had their money in safe banks began to panic and tried to withdraw all their money. This led to bank runs, and eventually to the Panic of 1907. The federal government had no power to do anything, and the panic was ended only when J.P. Morgan gathered other wealthy bankers and put up the money to keep the American economy going.

Senator Nelson Aldrich (R-RI) saw this and realized that panics were become too frequent and we could not depend on the wealthiest people to bail out the entire country. He introduced legislation that year to create the Federal Reserve. It took a while to pass both houses of Congress, but it did and on December 23, 1913 President Wilson signed it into law.

In addition to being the bank of last resort for troubled banks, the Fed also set the interest rate at which they will lend, and this sets the standard for the interest rate banks lend to other banks. During times of inflation the Fed will increase the interest rate to “tighten up” the money supply. During times of recession (as happened in 2008) they will lower interest rates to encourage borrowing.

There are those who oppose the Fed and they do this for two reason. First, they say that the board of governors (who govern the Fed) have too much power. Since they essentially set interest rates for much of the money flow in the country they control too much of what happens in the economy. They also believe that since banks know they will be bailed out, they can be irresponsible. If the banks keep all their profits and don’t have to worry about their losses, they have no reason to be careful.

I understand both of these arguments but in the final analysis I think we’re better off giving the government the flexibility to guide the economy.

The Money Chronicles Volume 9: Whatever Time Warner Calls It, It’s Not Customer Service

Friday, December 20th, 2013

Like many households, we get our TV content through cable, namely Time Warner Cable. We’ve been a customer of Time Warner for about 20 years. About 14 years ago we upgraded to a larger channel package, and about 10 years ago we added high speed internet. During that time the price has gone up, but we’ve made no changes in our plan in 10 years.

Last week got a letter that said our “special promotional rate” is ending and our rates will go up about 28%. But…the good news is that because we’ve been such good customers, our increase will be only 21%.

As they say on ESPN, “C’mon man!” Do they really think this is anything more than a 21% increase in our cable bill? Do they really think I’ve been enjoying a temporary promotional rate for 10 years?

We have several options other than Time Warner Cable, but I like the high speed internet and want to keep our email addresses. So the other night I did a live chat. I’m posting it here:

Nyla> Thank you for contacting Time Warner Cable. At the end of our chat you will be given the option of taking a brief sturvey. My name is Nyla and I would be happy to help you. Hi Tom! Let me access your account detaills for the same. Please allow me a moment.

Tom> Thank you Nyla. I currently get both my cable TV and my internet through Time Warner Cable. Right now I pay $96.00 per month for both. If I cancel my TV but keep the high speed internet, how much would that be?

Nyla> I understand your concern. Please allow me a moment. I see that you are having the bundled service at the discounted rates and you are planning to switch to Internet only plan in the near future. I am afraid as I do not see any new offer that can be set up on your account at his moment. However, I found a good deal of $99.99/mo for 12 months promotion. It includes all the three services as of now. I am afraid, I do not have the code to add that promotion and therefore, I am unable to confirm whether your account is eligible for this promotion. If you want I can provide you the phone number to check the eligibility and check other details available for you. Also, please note that currently your account is on extended promotion.

Tom> Yeah, that doesn’t really answer my question. How much would it be for me to get only the high speed internet access and nothing else?

Nyla> The normal rates for this bundled services are $105.99 and you are getting that at a discount of $26.00 effectively making it $79.99. As your services are bundled I cannot get the actual rates.

Tom> Why not?

Nyla> However, you are having the Standard Internet on your account. The normal rates for that alone currently are $54.99. As two services are bundled and therefore they are at discounted rates. I cannot unbundle them to see the individual charges for each.

Tom> Does that mean that if I cancel my TV cable and keep internet access, my monthly bill from you is $54.99?

Nyla> I can help you with the number to see what you might be eligible for. No.

Tom> OK, then what does it mean?

Nyla> I cannot unbundle the services to get just the Internet prices for you. There are different types of bundles available for different areas, different customers according to different plans. Due to restricted system access, I am unable to do that.

Tom> Can you connect me with someone who can?

Nyla> I request you to call the Customer Service at 1-888-892-2253. Sure. Sorry for the typo.

Tom> I’m talking with you from La Jolla, California. Just out of curiosity, where are you?

Nyla> Tom you have to call the above provided number. We are located in Western India.

Tom> OK Nyla, thank you for your time.

Nyla> Again, my name is Nyla. Thank you for chatting with Time Warner Cable. We value you as a customer and are here to assist you 24 hours a day, 7 days a week. If you would like to take a brief survey, please click on “Close” and the survey will load.

Does it appear to anyone else that Nyla isn’t really customer service, but a salesperson?

Direct TV, expect a call from me.

The Money Chronicles, Volume 8: Reflections on Black Friday

Friday, November 29th, 2013

Today is the day after Thanksgiving, commonly known as “Black Friday.” It’s an important day for many retailers and it’s called Black Friday because it’s the first day of the year many businesses go from being “in the red” (debt) to being “in the black” (profit). It’s no understatement to recognize how much energy they put into making sure as many of us spend as much money as we can.

They use a number of strategies, some obvious, some not so obvious. We’re all familiar with two of them: discounts and expanded hours. If you were willing to get in line early enough you can save money.

But it’s the less than obvious strategies that interest me and they are right under our noses. Some of the media is picking up on this, but at least a few major retailers inflate the price and then discount it to give the appearance of savings. If a flat screen TV set was $300 but today is discounted to $200, was it really ever $300? I think most consumers are so wowed by the idea of saving $100 that they don’t look to see the actual retail price.

In seeing the ads, do you ever notice the phrase “While Supplies Last?” It’s the reason people are willing to stand in line for hours. A limited supply creates several advantages for retailers and I’m amazed at how many of us fall for it. It creates a frenzy that shouts out the voice that asks “Do I really need this?” Instead we wait in line, race down the isle, and grab it before someone else does. We’re already seeing news stories about fistfights in stores as otherwise smart and well meaning people turn into crazed lunatics. And for the people who didn’t get in line early enough and missed out? The retailers know that we aren’t willing to come home empty handed and they have lots of other (and more expensive) merchandise for us to purchase.

A few years ago one on Nancy’s colleagues told me that all conflicts come down to three categories: resources, feelings, and values. These conflicts are born out of scarce (and intentionally created) resources. By telling us that there are only a few products available, they tell us that we have to throw caution and good sense to the wind, and get it now.

So let’s not do that. Let’s do exactly what they don’t want us to do: take a breath, pause, and ask: Is this really worth all the frenzy? Will this make as much sense next June as it does now? Is it possible to be happy by wanting less than having more?

I think it is.

The Money Chronicles, Volume 7: Reflections on the 47% vs. the 53%

Tuesday, September 25th, 2012

Last week a video surfaced of Governor Romney speaking at a recent private fundraiser. This is what he said:

There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what. … These are people who pay no income tax. My job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.

I lifted this quotation from Yahoo; please tell me if it’s not accurate.

Several things trouble me about this quotation, and I’ll list a few here (and perhaps add to it as I think more about it).

  • Governor Romney was speaking at an event where he assumed everyone there supported him and he didn’t think it was being taped. It’s an old adage that character is developed when we think nobody is watching us. This quotation is dramatically different from what he says in public and it tells us a great deal about his character.
  • The 47% draw from a large and diverse group of people, and Governor Romney wants to put them all in one camp: they are dependent on the government, they believe they are victims, they believe someone else is responsible for their care, and they are entitled to health care, food, and housing. The meaning is clear: they are doing nothing productive and expect the 53% (of whom I belong) to care for them.
  • They believe that they only way they can keep this cushy arrangement is to vote for the President and nothing will convince them to take responsibility for their lives.
  • Lastly, it is not his job to to worry about these people.

OK, so who are these 47%? Good question. Governor Romney acquired this number from the Tax Policy Center; there are those who think it has a liberal bias, but Governor Romney must not as he quotes them. They describe the 47% here:

  • The poor: In 2011 if a family of four made $26,400 or less, their income was too low to pay taxes. To be fair, I can’t imagine them putting food on the table, let alone paying taxes. They don’t sound like freeloaders to me, and I’d guess they’d give anything to make enough money to pay taxes. They are half of the 47%: I’m guessing they’re not heartened to learn that Governor Romney’s job is to not worry about them because they are freeloaders.
  • The elderly: If you and your spouse receive less than $32,000 in Social Security benefits ($2666.67 per month) or other income, you don’t pay taxes. If you live on that much money and pay taxes, you have a point. Otherwise, move on because these are people who worked hard for their entire career, paid into Social Security, and don’t have pensions, 401(k)’s, or 403(b)’s and they are not freeloaders.
  • The disabled: Again, if you are disabled and poor, you don’t pay federal taxes. Think this is a free ride? Talk to someone who depends on this. Ask him or her if he or she would rather be able to work and pay taxes. Nearly 100% would like to be productive.

You can’t read this blog without knowing my political views. But let’s face it: Mitt is choosing the path of pandering to the wealthy. Vote for him at your own risk.

The Money Chronicles, Volume 6: An Economics Rap Anthem? Believe It!

Saturday, September 15th, 2012



For a year or so I’ve been listening to a podcast called Planet Money from National Public Radio. I look forward to listening a few times per week and it’s taught me a great deal about what is happening in the economy.

It’s also become a bit of a political football as President Obama is a follower of the economist John Maynard Keynes (1883-1946) while Governor Romney is a follower to the economist Friedrich A. Hayek (1899-1992).

Keynes believed that in times of dire economic depression the government needs to pour money into the economy to stimulate it and raise itself out of its troubles. Hayek believed that governments can’t do this effectively and it is better in the long run to allow the economy to fix itself. This rap does an excellent job of explaining their positions.

The Money Chronicles, Volume 5: Flat Tax: How Flat, How Fair, and How Feasible?

Wednesday, November 23rd, 2011

A few of the candidates for the Republican nomination are proposing a flat tax instead of our current progressive tax.

A progressive tax raises the tax rate as income increases; in other words a wealthy person pays a high percentage of his income in taxes than a poor person. Here are the 2011 tax rates on individuals:

Income Tax Rate
$1 to $8500 10%
$8500 to $34,500 15%
$34,500 to $83,600 25%
$83,600 to $174,400 28%
$174,400 to $379,150 33%
$379,150 and up 35%

We also tax corporations, but at different levels (I got this from Small Business, Taxes, and Management web page):

Profits Tax Rate
$0 to $50,000 15%
$50,000 to $75,000 25%
$75,000 to $100,00 34%
$100,000 to $15,000,000 35%
$15,000,000 to $18,333,333 38%
$18,333,333 and up 35%

OK, so far so good. Now here’s where it gets complicated: there are deductions to income. From the time the government taxed income in 1913, interest on your home mortgage could be deducted from your income. We can also deduct money donated to charities, and lots of other places. Every time the President says: “and I call on Congress to give a tax break to people who…” it creates another deduction. We use tax deductions all the time to change behavior. We deduct mortgage interest rates because we want to encourage people to own homes; we deduct charitable contributions because we want people to donate to places of worship, food banks, and other charities.

We also want people to save money for retirement. If you contribute money to an IRA, a 401(k) or a 403(b), that money isn’t taxed when earned but is taxed years later when withdrawn. It is generally assumed that money will be taxed at a lower rate because income is usually lower in retirement.

This means that the money you earn isn’t the money you pay taxes on. The hard work of determining your taxes isn’t figuring out how much you owe; it’s how your taxable income is determined. The hard part of doing your taxes (and the reason most of us have a professional do our taxes) is finding the difference between your gross income and your taxable income. Once that is calculated we can look on a table to see what we owe.

So here’s the rub: the candidates who propose a flat tax argue that it’s fairer than a progressive tax and will make it easier for all of us to do our taxes. I suspect most taxpayers don’t really know what percentage they pay in taxes but have a sense that it’s too much. But I do think that most people think the tax code is way too complicated and don’t like the fact that they either need to pay a professional or spend hours preparing their tax return. Do these proposals do what they promise? I propose to look at the plans of three of the current Republican candidates: Herman Cain, Ron Paul, and Rick Perry.

Herman Cain: Mr. Cain proposes what he calls his 999 Plan for Economic Renewal. It is elegant in its simplicity: Personal and corporate income are both taxed at 9%, and a 9% federal sales tax is imposed. That means that if you earn $50,000 this year, your tax would be $4,500. If your corporation makes $500,000 it pays $45,000. If you buy $100 in groceries your bill will be $109. Right?

Not exactly. According to his web page, individuals will pay 9% of their gross income minus money donated to charity. Also there will be tax breaks for people who live or work in an Empowerment Zone (though he doesn’t explain what an Empowerment Zone is or how its chosen). This begins the process of determining the difference between gross income and adjusted gross income. I have a hard time imagining that once this door is cracked open Congress won’t want to add deductions.

Shortly after he announced the 999 plan last month he came under criticism for making even the poorest pay the same rate as the richest. Even though this is the basic foundation of a flat tax, Mr. Cain tinkered with his plan. You can read about it on Fox News: he amended his plan to make anyone at or below the poverty level exempt from the 9% tax, now called 909. Here’s an interesting question: if you’re marginally above the poverty rate but donate enough money (or live in an Empowerment Zone) to adjust your income below the poverty rate, does your tax bill drop from 9% to 0%?

Perhaps the most controversial part of this is the 9% sales tax. There is currently no federal sales tax on most things (though there is an 18.4% tax on gasoline). Many states and localities do have a variety of sales taxes. Where I live there is a 7.75% sales tax on most items, but not on groceries. It’s not clear that Mr. Cain’s plan would add 9% to current local sales tax, or if it replaces those taxes, how states and localities would replace that money.

Ron Paul: This is hard to decipher, but you can look for yourself at his page on taxes. Ron suggests eliminating income taxes on individuals (and, interestingly enough, taxes on tips. I guess he figures that if you work in the restaurant or the hospitality industry, tips aren’t income). In any case, Ron is running for the Republican nomination, but he’s really a libertarian. He calls for a Constitutional Amendment that repeals the 16th Amendment and also calls for the closing of the IRS. He doesn’t worry so much about raising the money to fund the government as to shrinking the government to fit within the available funds. Government funds would be raised by a 15% flat rate on corporations.

Rick Perry proposes a hybrid plan. Essentially he gives the taxpayers a choice: pay your taxes under the current tax code, or choose his New Flat Tax System. That system uses a form called the 1040EZR. You put in your gross income, claim $12,500 for each exemption, deduct mortgage interest, charitable contributions, state/local taxes, and capital gains/dividends. This gives you a taxable income and you pay 20% of that. Governor Perry thinks this 1040EZR will be appealing enough that many taxpayers will use this form over the standard 1040 even if their taxes will go up.

So where does this leave us? The idea of a flat tax appeals to the fairness in all of us, but proponents of progressive tax argue that those who have more can bear a larger share. Right now if Bill Gates and I purchase the same car we would pay the same sales tax, but since he makes more money than I do, he would pay more in income tax.

These candidates, and others, argue a flat tax is not only fairer but also easier. The problem, at least with Cain and Perry, is they have already abandoned a pure flat tax to the extent that both allow deductions for charitable contributions. I also wonder about the pushback any candidate would get (for example) from the National Association of Realtors for trying to eliminate the deduction for mortgage interest.

The Money Chronichles, Volume 4: And I’m Supposed to Trust These Guys With My Credit?

Monday, December 20th, 2010

Today both Nancy and I received offers for a credit card. It’s not unusual, we shred the equivalent of a small forest of these things each year. Today’s had a funny twist.

For the record, both of these offers (in separate envelopes) came from Capital One (they are the “What’s in your wallet” guys). But when I opened the envelope addressed to Nancy, the return card was addressed to me. When I opened my envelope it was addressed to one of my neighbors. Presumably my neighbor has the one addressed to me. Or it could be a massive mix up where dozens of us are getting each others’ offers.

These offers succeed to the extent that they convince me to use their card. Suffice it to say they didn’t impress me and I have no desire to do business with them.

The Money Chronicles, Volume 3: Great Moments at the Cash Register

Saturday, October 16th, 2010

I ran a simple errand today: I needed to get a wallet and drove to my local department store. I expected to pay about $30 and get something that will last a few years. As I walked up to the Macy’s at the University Town Center I saw there was a table near the entrance. Fortunately it wasn’t someone looking for my support for a candidate or ballot measure: it was the Susan G. Komen Race for the Cure and they were collecting money to end breast cancer. I cheerfully gave them $5.00 and I was given a coupon that I could use at the store. Here is a copy of the coupon:

Macy's Coupon


I know it’s hard to read, but bear with me (I’m sure there was no intent to make it confusing). The coupon grants discounts of 10%, 20%, or 25% depending on what you buy. I intended to buy a man’s wallet. The discount would be 25% if it was a “single regular, sale or clearance fashion item for the entire family including accessories, plus selections for your home.” The discount would be 20% if I’m buying a “sale & clearance and select regular priced women’s [sic], men’s [sic] and kids’ apparel and accessories, fine and fashion jewelry, frames, bed & bath items, housewares, luggage, and china.” The 10% discount appears to apply only for “all sale & clearance and select regular-priced furniture, mattresses, area rugs, electrics and electronics.” Any idea where my wallet fits? Me neither.

I walked into the store and found the mens’ wallet display. There were three tables: one table announced that everything on the table is on sale for 20% off. The second table had a sign that all wallets there were 30% off. The third table had a sign that was covered up. You make the call. As you might expect, my first question was whether I could combine the two discounts: the sale price on the wallet and the coupon. I found a suitable wallet (manufactured by Geoffrey Beane if that matters to you). The list price was $36, the upper level of what I wanted to pay. But wait: it’s on the 30% off table and I have a coupon for either 20% or 25%. How much is the wallet now? Good question. The first salesperson I asked read the coupon and said that I have to have a Macy’s credit card to use the coupon. I asked where he sees that on the coupon and he called another salesperson over. This person seemed to think I could combine the two, but he wasn’t sure (that’s what the cash register was for). We walked over to the cash register and he suggested that I apply for a Macy’s credit card which would give me an additional 25% off of this purchase. That would have been fun, but I declined. At this point I’m still not sure what I’m going to pay.

OK, drum roll: the 2nd salesperson rang me up and the total price was $21.92. I can’t complain, and I bought the wallet. Now, here’s the question: how did it go from $36 to $21.92? I started writing the Money Chronicles because of experiences like this. We’re often bombarded by offers of discounts and sales, and more often than not we have no idea how much we’re going to pay. The 30% off table looked enticing, and being able to save an additional 10%, 20%, or 25% sounded even better. But neither I nor the cashier knew how much I would be charged until the cash register told us.

One thing I knew right away was that I wouldn’t get 55% off (30% plus 25%). But let’s start with the 30%. The list price of the wallet was $36.00 and 30% of that is $10.80. Subtract the $10.80 and the wallet should be $25.20. So far so good. Now for the second part: it appears that my wallet is catagorized as “sale & clearance and select regular priced women’s [sic], men’s [sic] and kids’ apparel and accessories, fine and fashion jewelry, frames, bed & bath items, housewares, luggage, and china” as I was given the 20% discount. I guess the wallet is an accessory. Too bad it doesn’t qualify as “for the entire family” as I would have gotten 25% off. In any case, I got 20% off the $25.20. That’s $5.04, bringing the total down to $20.16. Add the 8.75% sales tax of $1.76 and it brings the total to $21.92.

In the end, I was discounted $14.08, which was 39%. But I wonder how many people would have thought I’d have gotten 50% off (30% plus 20%). Each discount made the next one less valuable, and I have to wonder this: if I had applied for a Macy’s credit card, where would that discount have come? I’m guessing it would have been after the 30% and before the 20%. That being the case, it would have gone like this: Start with $36.00, minus the 30% ($25.20). Now take the credit card 25% ($6.30) and that gets me down to $18.90. Now the 20% coupon gives me another $3.78 off, bringing the total down to $15.12. Add on sales tax and we’re back up to $16.44. It gives me a new credit card with (likely) a high interest rate, and it would have saved me $5.48. Doing the math makes it seem less valuable.