Changing Behavior: Money as a Carrot or a Stick

Over the past few years My Organic Market (M.O.M.), a natural and organic grocery store, has deducted 10 cents per reusable bag from a customer’s total grocery bill.  That’s the highest benefit given by any grocery store I’ve visited in the Washington DC metropolitan area.  Whole Foods gives a 5 cent credit per reusable bag.  Giant, the largest grocery store retailer in the Washington DC metropolitan area, originally gave a 3 cents credit per reusable bag (thumbs down) but has increased the credit to 5 cents.  Although the “credit” is relatively small, it has caused me to change my behavior.  I keep 5 -8 reuseable bags in the truck of my vehicle.  Not surprisingly there have been a few occasions when I forgot to replenish the reusable bags in the trunk of my car.   And, I then kick myself for my forgetfulness.

Carrying reusable bags has become so ingrained that I prefer these sturdier bags over the often flimsy bags issued by retailers, even though some retailers don’t give customers a credit.  Whenever I patronize the farmers’ market (usually in Takoma Park, Maryland) I carry two reusable bags with me (no credit given at the farmers ‘ market).

In contrast, effective January 1, 2010 the District of Columbia required retail food establishments (grocery stores, convenience stores, drug stores, certain types of liquor stores and restaurants) to charge 5 cents for the use of  paper or plastic bags.  The impetus for this “tax” is to provide funding to help keep the Anacostia River clean.  Apparently lots of paper and plastic bags end up in the Anacostia River.  The District of Columbia also hopes to alter consumers’ behavior by encouraging consumers to carry reusable bags thereby avoiding a 5 cent charge to the grocery bill.

The carrot (5 to 10 cent credit toward the grocery bill) versus the stick (5 cent charge per plastic/paper bag added to the grocery bill).  I prefer the “carrot approach” but I bet the “stick approach” is more effective in one, getting the customer’s attention, and two, changing the customer’s behavior.

Which approach would cause you to change your behavior?

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A Plea for Help with Coins

Another topic on charities/charitable organizations.  You say, not again!  I do admire charities and support a number of them.  But some practices are irritating.

Have you had this experience?   You get a letter in the mail from a charity asking for a donation.  The mailing from the charity does not include address labels but includes coins (nickels, dimes or pennies) taped to the letter.  The charity asks you to return the coins with a recommended donation.

Today I received such a request from World Villages of Children (a project of Asian Relief , Inc.).  This is not the first time I’ve received a request for money from this organization.  Last year I did return the 15 cents with a donation.

The letter from World Villages of Children states in pertinent part,

I desperately need your help so I can continue helping Dion and the rest of  my children.  It costs  only $12.15 a week to feed, care for and educate one child at one of our Children’s Villages.

And that brings me back to the three nickels!  Please send the 15 cents back to me, along with your check for $12.00.  Or more if you can.

I know I ‘m not the only prospective donor who has received a letter with coins.   How many people give?  How many instead pocket the three nickels?

Let’s say you give to certain charities but you don’t necessarily want to give money to this particular charity.  What do you do? Do you feel bad if you don’t give?

Let me make clear that World Villages for Children is not the only charity employing such a tactic.  And because several charities include “change” with the letter pleading for a donation, this tells me the tactic is effective.

On the one hand, I don’t want to be heartless and pocket the three nickels.  On the other hand, I”m “maxed out” with charities I am supporting.

My solution?  Yes, I’m going to return the 15 cents and the self-addressed envelope with postage affixed to the charity.   I will include a letter to the charity asking it to remove my name from its list.   I’ll spend some money out-of-pocket to return the letter.  But I feel this approach is the right way.

Your thoughts?

Thank You But No Thank You

Follow-up to “Did you receive our gift? topic, found under Pages and entitled One Lady’s Views on Money Matters:  From the Profound to the Mundane.

Today a family member mailed the unsolicited gift (polar fleece blanket throw) back to the charitable organization.  I asked the family member to mail with delivery confirmation.   The family member was tired and busy and the family member sent  the package by priority mail (YIKES).  That cost $5.35.  With the cushion mailer costing $1.69, the total cost is $7.04.

Lesson learned?   In the future, don’t waste money on returning an unwanted gift.  Instead give the gift to someone who may want/need it.

Besides the polar fleece blanket throw, the cushion mailer contained two other items:  the follow-up letter from the charitable organization and a one-page letter, in large size font, stating “Thank You But No Thank You.”

Flexible Spending Account Plan

Also known as a Health Care Reimbursement Account (HCRA).  What a great concept.  You select how much you want to set aside for the year.  A fixed amount of money is deducted, pre-tax, from your pay check each pay day.  For example you decide to set aside $50 per pay period.  If you are paid every two weeks, there are 26 pay periods in a year.  $50 x 26 = $1,300.

Let’s say you visit the optometrist.  You have no vision care insurance.  Moreover your health care plan does not cover regular visits for vision care.  The office visit is $75 and your optometrist gives you a contact lens prescription so you may order your contacts from 1-800-Contacts.  The cost for contacts totals $150. After spending $225 for the visit and the contact lenses, you file a request for reimbursement with the company managing the HCRA.

You have to be careful not to set aside too much money for the HCRA.  If you don’t use all those pre-tax dollars you set aside, you lose them.  So review last year’s out-of-pocket expenses to project the new year’s out-of pocket expenses.  Of course, this is not an exact science.

HCRA is definitely a benefit.  So, why have I stopped participating?

Mainly, because with my particular HCRA a) the system does not recognize all forms of alternative medicine and b) for non-prescribed supplements, you have to get a written statement from a doctor explaining the necessity of the vitamin, mineral or herb to obtain reimbursement.

Acupuncture is widely known and apparently has become more accepted in the medical community.  My HCRA would reimburse in full when I filed claims for sessions with an acupuncturist.

However ayurveda is not as widely known nor apparently widely accepted in the medical community.  What is ayurveda?

“The Maharishi Ayur-Veda system is the world’s oldest and most comprehensive system of natural health care. . . it offers complete knowledge of life and how to create and maintain an ideal state of health.”

From Forever Healthy: Introduction to Maharishi Ayur-Veda Health Care by Kumuda Reddy, M.D., Stan Kendz at page 12.

This system of natural health care is from India.

My HCRA reimbursed me for my office visit with Dr. Reddy.  However, the herbs Dr. Reddy prescribed would not be reimbursed.  I was told by a representative of the company managing the HCRA that I would need a statement from a doctor [I guess Dr. Reddy’s word is insufficient] that the herbs are a necessity.

Now, that’s a joke.

Let me tell you how effective the herbs have been.  I saw my ENT last July for an annual check-up.  He has prescribed protonix on multiple occasions for a type of reflux I have.  Overtime I became uncomfortable with this medication and began searching for alternatives.  I eventually found Dr. Reddy and followed her herb regiment.

When the ENT examined me (via a scope placed through my nostril), he was astonished.  The condition had completely disappeared.   He asked, what was I taking?  I explained I was following a regiment as directed by my Ayurvedic doctor.   The ENT commented, maybe he should see my Ayurvedic doctor.

So, I’m no longer taking protonix, a rather expensive drug, yet I’m denied reimbursement for an effective herbal remedy.  Doesn’t make sense.

I encountered this problem a few years earlier when I sought reimbursement for garlic tablets.  I was told I would need to obtain a statement from a doctor explaining the necessity for taking such a supplement.

Sorry but none of the doctors I’ve seen prescribe minerals and supplements.  Thus, I can’t obtain a statement demonstrating the necessity of the mineral or supplement.  Therefore, I won’t be reimbursed.

After my claim for reimbursement for the herbs prescribed by Dr. Reddy was denied, I found enough medical co-pays to use the remaining pre-tax dollars in my HCRA.  However I decided, for me, seeking non-traditional medical services means a HCRA is worthless.

My solution – I budget the amount of money needed to cover the costs of my herbs.

“Profitized” Medicine

What’s the opposite of socialized medicine?  Well, profitized medicine, of course.

What is profitized medicine?  The best definition I can provide is from a book I’m presently reading entitled The Healing of America: A Global Quest for Better, Cheaper and Fairer Health Care by T. R. Reid.

The following two paragraphs are from pages 36 and 37 of T. R. Reid’s book.

The United States is the only developed country that relies on profit-making health insurance companies to pay for essential and elective care.  About 80 percent of non-elderly Americans have health insurance; generally they get it through the job, with the employer paying part of the premium as well.  The monthly premium goes toward paying the worker’s medical bills, but the insurance firms also soak up a significant share of the premium dollar to cover the costs of marketing, underwriting, and administration, as well as their profit.  Economists agree that this is about the most expensive possible way to pay for a nation’s health care.  That’s why, as we’ll see throughout  this book, all the other developed countries have decided that basic health insurance must be a nonprofit operation.  In those countries, the insurance plans — sometimes run by government, sometimes private entities — exist only to pay people’s  medical bills, not to provide dividends for investors.

It’s revealing that, in the lingo of the U.S. health insurance industry, the money  paid to doctors, hospitals, and pharmacies for treatment of insured patients is referred to as “medical loss.”  That is,  when health insurance actually pays for somebody’s health care, the industry considers it a loss.  (Health insurance executives  explain that “loss ratio” is a technical term borrowed from the fire and casualty insurance business.)  Insurance executives,  securities analysts, and the business media carefully watch each company’s medical loss ratio to make sure that the actual medical payments don’t eat too deeply into administrative costs and profits.  According to their filings with the Securities and Exchange Commission, most for-profit insurance companies maintain a medical loss ratio of about 80 percent, which is to say that 20 cents of every dollar people pay in premiums for health insurance doesn’t buy any health care.  If a health insurance company consistently spent much more than 80 percent of its money on actual health care, its stock would plummet and its CEO would be axed.  When California governor Arnold Schwarzenegger proposed a health insurance reform law in 2007 — the plan known as ArnoldCare — he included a requirement that health insurance companies spend at least 85 cents of every premium dollar on medical bills.  Insurers denounced this proposal as socialism and killed the ArnoldCare bill before it ever came to a vote in the state senate.

A rather concise definition of profitized medicine.

I do value consistency in one’s viewpoints or positions.  I will try my best to keep this blog NON-POLITICAL; however, when it comes to money, such aspirations cannot always be achieved.

Here’s my two cents.

If you don’t want socialized medicine, I assume your children are educated at home or a private school, instead of at the socialized elementary school, middle school or high school.

My mother, a young widow with three children, placed my siblings and I in Catholic Schools.  We’ve all excelled, I guess, because we didn’t attend the socialized public schools.

For those who have served or are serving in the Armed Forces, not only are you the recipient of socialized medicine, but you (and often your dependents) are entitled to socialized legal assistance.  Veterans also are recipients of socialized medicine.  You say, no way?  Next time you speak with your military family member or friend, ask him/her about the medical bills he/she receives for medical care.  Government-employed doctors, dentists and nurses at government-owned clinics and hospitals provide medical care to military members without ever sending the active duty military member a bill.

For those of you opposed to socialized medicine I assume you only buy books or swap books with friends.  You don’t patronize the library because, well, that’s socialism.

BTW, I did borrow T. R. Reid’s book from the local library.  I guess that makes me a socialist?

Labeling people or their viewpoints is easy.  Delving into a thorny issue to understand the heart of the problem, I guess requires too much effort.  Plus, it’s a lot more fun to call one another names, point fingers and regress to kindergarten.

Credit Score

Lending standards have really tighten during the Great Recession.  Credit card companies have increased interest rates (what AMEX did to me – I closed the account), reduced one’s credit limit or both.

Want to buy a house?  You must have a nearly perfect credit score and 20% for a down payment.

So, with lenders becoming so selective in their lending standards, has the credit score been altered for these changing times?

Not at all.

In mid December I received my credit score from Trans Union.  My score = 747 (out of 850).  According to Trans Union that score is 78% higher than others.  Lenders view me as a “good” though not “very good” borrower.

As reflected on my credit report I have four open accounts:  a mortgage on Property A,  a first and second trust on Property B and one credit card with a $2,000 limit.  Property A has tons of equity, Property B very little.

Trans Union gives three suggestions on how I can improve my credit score.

#1  There are not enough premium bankcard accounts on your credit report.

Yes, it actually says that.  Hello, Trans Union – are you not aware of the changing credit environment?  Credit card companies are alarmed at the number of individuals who are delinquent.

#2 There are not enough accounts in good standing on your credit report.

Absolutely FALSE!  Every account on my credit report, both open and closed, are/were in good standing.  I am presently and have always been current on each account.

#3 Your account balances are too high in comparison with your available credit.

Again FALSE.  I have one credit card with a zero balance.  Anytime I used that credit card, I’ve paid the balance within a week.  The highest balance on this card, as documented on Trans Union’s report, was $567, which is less than 30% of the limit [Trans Union suggests keeping balances below 35 percent].

Now, on Property B the debt level is high, but mortgage debt is not revolving debt like a credit card.

Reasons #2 and #3 don’t wash.  So, in essence, Trans Union is telling me to become more indebted.  Crazy, isn’t it.

The goal is to become debt free, not accumulate more debt.

I guess the folks at Trans Union have never read Proverbs 22:6 – “The rich ruler over the poor and the borrower is servant to the lender.”

I’ m tired of being a serf, slave or servant to debt.  Nirvana is to be debt free.

Open more premium bankcard accounts?  No way.

The credit rating agencies should assess borrowers differently in the vastly different lending environment.  My credit score should be higher, since I have only one credit card and no balance.  Instead, I’m penalized.

Waste Not

Last Sunday I baked five, that’s right, five banana nut breads.  Today I baked two.  Why so much banana nut bread?  Because a family member has purchased bananas, ate one at the most each time, allowing the others to ripen.

No, I’m not letting good food go to waste.  Banana nut bread, a quick bread, is quick and easy to prepare so that was the best use of those ripe bananas.  There are four quick breads in the freezer to be devoured soon.

And, yes, I told the family member –  stop buying bananas.  🙂

Udderly Cool – Prepay, 10% Discount

I love my local dry cleaners, Wellers, in Silver Spring, Maryland.  This company handles clothes with care.  I also LOVE that they offer their customers a 10% discount if one prepays  for the service.

My motto – save money whenever possible 🙂

Hello. Money Matters. See what I have to say. What do U think?