Wednesday, March 29, 2006

A thought about this weekend:

So I went away this weekend and heard one of the most horrifying quotes ever: "Yeah, my girlfriend is a vegetarian and I can't cook, so I go out to eat for lunch and dinner almost every night."

I cannot think of many worse ways to spend money than to go out to eat everyday. Think of how much money you are wasting in doing that? Not only are you paying probably double what you would pay to make food, but you also waste gas and time going to and from the place. He isn't going out to fast food places and getting the dollar meal either, he is going to Panera a lot of times and Subway other times. Looking back at my last job and how much money I spend on getting lunch every day, I can't imagine doing that every night as well. I feel so stupid knowing that I went out to lunch 3 days a week and wasted $21 or so every week. Now if he spends 7 dollars for lunch and dinner every weekday, that's $63 just on his food, plus if he takes his girlfriend out to eat for dinner Friday, lunch and dinner Saturday and the same again Sunday, that's probably another $175 for a grand total of $238 a week!

How about instead he just puts that into a checking account? He would have over $12000 every year! Now imagine the possibilities if it were to go into an index fund at the end of each year and earn around 8% every year? After the first year he would earn over $1000 on his investment. If he invested the $238 a week into the index fund instead of a lump sum at the end of each year he would earn even more money. So tell me again why you would go out to lunch every day, or three days a week, or more than one or two days every week?

Track your spending and cut out most of the unnecessary stuff today!

Monday, March 20, 2006

Just to clarify my last article:

It seems there was a little confusion about what I said in the last article dealing with when to, and not to use your credit card. If you are able to pay off your card every single month, then by all means use the card for all your purchases. However, if you ever get a little behind, even if it's only $25 dollars, you need to stop using the credit card to purchase everything. This is how people end up in credit card debt. First they say only have a $25 balance is okay, I will be able to pay it off next month, then the next month they have $100 balance and say oh I am getting a big pay check next month I will pay it off then, then you are thousands of dollars in debt and your minimum payment is more than $200. DO NOT LET YOUR CREDIT CARD DEBT GET THIS WAY! In fact, don't get into any credit card debt!

Thursday, March 16, 2006

What not to buy with a credit card:

The following items are things that you should not be using a credit card to purchase. After you read them, I will explain why it is a bad idea:

1. Groceries
2. Gas
3. Coffee
4. Fast Food
5. Restaurant Bills
6. Tobacco Products
7. Alcohol
8. Gifts
9. Rent
10. Utility Bills (electricity, Heat, Cable, ect.)

Why is it such a bad idea to use a credit card on these things? None of these items hold any value! Groceries, gas, and tobacco products will all be gone within a week or two, why would you want to be paying them off for months? If you are going to take time to pay something off, and pay extra for it via interest, you should at least still have it in your possession while you pay it off. Coffee, fast food, restaurant bills, and alcohol fall under basically the same thing, but they are gone even faster. Why would you want to pay interest on your medium mocha latte grande what ever it is from Starbucks, or take 4 months to pay off a 99 cent cheeseburger from Wendys?

"What about gifts, why can't you put them on your credit card? The stuff I buy my ____friend is expensive!" So why shouldn't you put them on your credit card? Once you give the gift to your significant other, it is not longer yours, and no longer holds any value for you. The person you gave it to may love it, or be able to pawn it and get money for it, but you will never be able to. It is basically the same as the choco latte mini with cream you got from Starbucks yesterday (Can you tell I don't like Starbucks yet?). Don't be paying for a necklace for 6 months after you gave it to someone.

Rent and utility bills are the worst things to be putting on your credit card. You have already used the service up and now you are going to pay for it over time and pay interest on it? If you can't afford to pay cash for your cable every month, cancel the cable. If you can't afford to pay your rent, it's time to start looking for cheaper places to live. If you use up too much electricity, turn the lights off when you aren't in a room, or buy energy saving light bulbs. You shouldn't have to pay interest on your cable bill, it already costs too much to have cable.

So there has to be some exception to this right? I mean, I am special so I can use my credit card to do this right? Well there is really only one way where it is okay for you to use a credit card to buy these things, and that is if you pay the credit card off completely every month. This way you never get charged any interest. However if there is ever a single month where you don't pay off the card in full, it's time to stop using the card. Don't make excuses, or say next month will be better, just stop using the card. This is how people get into trouble and it's a good way to piss all your money away on paying interest charges.

Say no to credit card balances!

Monday, March 13, 2006

Why I should have cared about money sooner:

I first started this blog a little while after I got laid off from my previous job. Not having a job made me realize that money is important, and I should do more than get my paycheck, pay my bills, and spend the rest. When I lost my job, I was fortunate enough to have some money saved for taxes because I was self-employed. The problem is, I used up that money, and now I have very little left for taxes, and the tax man wants a lot more than I expected. Now I'm left trying to shake some money out of my dried up money tree. So for the next money I will be looking for payment plan options to pay the money I owe over time. I'm hoping I don't get screwed over with the interest rate on this like I do with my credit card. Luckily for me, I am now an employee of a company, and they take care of taxes for me.

Friday, March 03, 2006

Lower your credit card's interest rate:

As discussed in my post yesterday, one way to reduce the time it will take you to pay off your credit card debt is to lower your interest rate. David Bach, author of The Automatic Millionaire among other books, says the best way to lower your interest rate is to just call the company and ask. He says when you speak with the first customer service representative simply ask them what your APR is, then ask to speak to a manager. When you speak with the manager tell them that you would like to have your interest rate lowered or you will be transferring your balance to another card (Use any card competitor: Citi Bank, MBNA, Chase, ect). Most of the time they will be willing to do this for you right away, because even if they lower the rate significantly, they still make plenty of money off of you. If this manager tells you no, ask to speak with their supervisor. Bach says eventually you will get someone who will lower your rate for you.

Well, I have tried this method, and failed. I have a PayPal Visa through Providian and they refuse to lower my interest rate. Every time I call they tell me that they review each customers account every 6 months and make needed changes to the account at that time. I have asked to speak to managers, their managers, and then their managers. No matter what I get the same scripted response. I asked to speak with the credit review department and told that they are not a "phoning department." So, playing stupid, I said "the credit review department doesn't have any phones? That seems strange." and the manager replied "Sir, I didn't say that, but they do not speak with customers. " so I proceeded to say thanks for nothing and hung up.

Now I do believe that calling and asking for a lower interest rate will work for many card companies, but as you can see, it isn't the end all be all of lowering your interest rate. So what is one to do when this happens. You have two main options, either suck it up and deal with it, or apply for another card and transfer your balance. If your card is maxed out, or close to it, it is unlikely that you will be approved for another card, so it's time to start paying it off as fast as possible. Then once you have half of it paid off, you are much more likely to get approved for another card.

You need to start this today, every day that goes by, you pay more interest to the credit card company.

Goals Update:

At the end of 2005 I had a post about goals for the new year and beyond. So having just read this post at Free Money Finance I decided to update you on how I have progressed with my goals.

The first goal I listed in that post was to determine how much you spend every week. I have gone a step further and set a spending budget. I give myself $25 dollars between each paycheck for spending (I get paid every two weeks). This may not sound like much, but unless I'm doing anything big, like skiing, I don't spend much money.

The second goal I listed was to put the money you aren't spending into a high interest savings account. I have opened two accounts, one at Emigrant Direct, and one at ING. I am building an emergency fund in the Emigrat Direct account and I am putting together money to open a ROTH IRA in the ING account. I set it up so that each account automatically gets about 7.5% of my paycheck each pay period. With it automatic, I never think about it or worry about it.

The third goal I discussed was a yearly financial goal. My yearly financial goal is to open a ROTH IRA and have $2500 in it by the end of the year. I will be opening the account this month and set it up to be automatically funded through my ING account.

And finally, a long term financial goal. I would like to retire before the age of 51! 51 seems so far away, over 30 years in fact, but with a ROTH IRA I will be taking the first step towards accomplishing it.

What are your goals?

Wednesday, March 01, 2006

Do you know how long it is going to take you to pay off your credit card debt?

Do you know how much credit card debt you have?

Do you want to pay it off and have money to invest?

Time to do something about it. You need to take the following steps of action in order to find out your total debt and start paying it off:

1. Call each company that you have a credit card with and find out what the balance is on the card. (If you can do this online feel free to do so)

2. While on the phone find out what the interest rate is on the card. (You usually can't do this online)

3. Add up the total from all of the companies and write it down in large print on a full size sheet of paper.

4. Tape this paper up some where that you will see it several times a day.

5. Set a reminder in your cell phone that shows you how much debt you have and goes off once everyday.

6. If the interest rates on your credit cards are all fairly close (within 5% of each other) you will be paying off the card with the highest interest first. If you have a card that has interest much higher you will be paying that one off first. (Look for an article soon on how to lower your card's interest rate) Use a loan calculator to determine how much you should pay each month and how long it is going to take you to pay off the card. To use this, first put in how much money you owe on the card, and then what interest rate you are paying. For the term, it really depends on how much you owe and how much you make each month. You should use half of your pay each month to pay this card off, so play around with the term to figure out how much you need to pay each month and how long it is going to take.

7. Now, what should you do with the other cards while you pay that one off? You of course still have to pay money to them each month, but how much? I would say pay the minimum plus at least $15. If you can't afford to pay more than the minimum, then don't! Do not get behind on payments however, this will destroy your credit rating.

8. Once the first card is paid off, repeat steps 6 and 7 until all of your debt is paid off!

You should be able to get yourself completely debt free in less than 5 years. Yes I realize that 5 years seems like forever, and it isn't worth it to get out of debt if it is going to take 5 years, but either you start towards getting out of debt today or you will be in debt forever.


Make sure you update the "how much you owe" sign that you have posted each month so that you can visibly see you are getting out of debt. If you don't know how much you owe, you will never get out of debt.

Take action today!