Posts Tagged "Money"

Using Credit Cards and Paying Them Off Immediately…Too Dangerous?

Posted by jefferson on May 11, 2012 in Making Money, Saving Money | 39 comments

For anyone trying to escape the clutches of credit card debt,  the first thing that the experts will tell you is to immediately cut up your credit cards, and stop carrying them around with you.  That way you remove the temptation of getting a quick and dirty “loan” every time you have the urge to buy something.  You cannot spend money that you don’t have, if you don’t have the cards to enable that behavior.

When we started our current journey out of debt,  I didn’t cut up my credit cards– but I did put them in a drawer in my kitchen.  However, as I was recently looking for a way to save some money on life’s necessities, I decided to pull them out again.  The idea that I came up with was to go ahead and use credit cards, in order to take advantage of their rewards programs.  However, instead of waiting for the bill to show up to pay off the balance, I would pay off the expense AS SOON as I get home from the store.

Credit card companies are undoubtedly betting on the fact that I won’t actually do this.  I don’t blame them;  if I looked at my personal spending history– I would make that same bet.  They make their profits off of the sky-high interest charges that they charge folks who carry a balance month to month.  The percentage of money that they pay back to their cardholders in the form of rewards programs, is a pittance compared to what they are making in interest charges.

But my plan is to take advantage of these programs without paying anything in interest.  I am not getting any kickbacks or anything from this post, but wanted to share how I am using these cards to my advantage.  It kinda feels like I am working the system a bit, but one slip (where I can’t pay my bill in full), and I will give money right back.

Target Red Card:  Target offers 5% off of your purchase at any time, if you use the Target Red card.   This credit card carries a disgusting interest rate of well North of 20%,  which will wipe out that 5% savings very quickly if you carry a balance.  However, Target’s prices are already low, and stacking another 5% on top is definitely appealing.

We mainly use Target for our home supplies and baby supplies.  We stock up on paper towels, toiletries, bath products, etc.  Target sells these items for less than our local grocery store.  Also, they often have promotions on their baby supplies where you can get a $5 or $10 gift card if you purchase multiple items.  When you stack low prices, promotions,  coupons, and an additional 5% from using the Red Card– you can really save some dough.

Chase Freedom Card:  The interest rate on this fine fellow is also not exactly dressed to impress.  However, if you can stay on top of your bill, this card has one of the best rewards programs around.  They give you 1% back on purchases no matter what you buy.  These reward points can be used in their online store, or even better– can be traded in 1:1 for cash.

The best part about using this card is that each quarter, they offer a few spending categories where you can get 5% cash back instead of 1%.  Right now, their promotion is 5% back on all grocery purchases.  One of our big goals right now is to save money on groceries, so this one is huge for us.  As a result, throughout all of April, I put nearly all of our groceries on this card, and banked a nice little $30 bonus at the end of the month ($600 x .05).  I couldn’t use the card at Aldi of course, as they don’t accept credit cards.

In previous promotions, they have offered 5% back on restaurants (not all that useful to us) and gasoline (very useful to us!), but the current deal is our favorite.  As long as I continue paying off the charge as soon as I get home– this works out to a very sweet deal.

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The truth is that this plan to save 5% at Target and 5% on groceries is a little dangerous to someone who has had issues with credit card debt.  You have to be careful, as forgetting to pay off your balance a time or two can quickly lead to your balance growing to an amount higher than you can afford to pay.  As such, a big caveat to the plan is insisting that you only purchase items on your rewards cards *if* you have enough money in your checking account to cover them.  As for me, I have decided to take the risk in the name of saving some extra money each month.

How about you guys? Do you ever use rewards cards?
Do you pay off the balances as soon as you get home?

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If you are looking for a good rewards card, there are tons of great deals currently available.

Applying Blackjack Strategies to Your Finances

Posted by jefferson on Apr 27, 2012 in Eliminating Debt | 17 comments

I recently was offered the chance to go to Las Vegas for a large work-related convention.  It is a great opportunity, and I will get a ton of great information from some of the top experts in the industry.  I am very excited about it, because I haven’t been to a conference of this kind, and because I haven’t been to Vegas in many years.  But while I am there– I will have to do my best to avoid the allure of the many blackjack tables that seem to be EVERYWHERE in that city.

Blackjack is my favorite game in the casinos, because the odds are only slightly tilted in the favor of the house, when compared to other games.  Before everyone starts waving their personal finance fingers at me,  please note that I don’t have any willpower issues when it comes to gambling.  I have always been good at math, and I understand the games and how the casinos make their money.  When you visit a casino, it is obvious that the vast majority of folks that walk in, don’t walk out happy.  There are a number of casinos in the town where we live, but I have only been in a casino maybe 20 times in my life, and have never lost more than $25 in a visit.

That said, the times that I have visited a casino– I quickly learned that I have the ability to play blackjack at a $5 or $10 table indefinitely and stay pretty close to even money.  Proper blackjack strategy has been tested with complex computer simulations involving millions of hands, and if followed correctly– changes the house advantage from 5% to 0.5%.   The strategy goes against logic at times, like when you have to “stand” after being dealt a 12 (against a 4-6 showing from the dealer, for example),  but you have to keep the faith that the math is on your side.  You can’t get too excited when you go up or down,  either, because the tried and true strategies will almost always level everything out in the end.

Digging deeper, I think that it is possible to apply some of these same blackjack strategies to the world of personal finance.  Dedication, persistence, and patience are requirements for success, and here in the real world- the end goal is so much more than $100 of potential casino winnings.

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BlackJack Strategy:   Double Down on Ten or Eleven
Finance Strategy:      Keep Your Eye Out for Opportunities

The odds in blackjack tilt towards the house only because you, the player, have to go first.  On many hands, players will bust before the dealer even has to do anything.  This is just part of the game.  The best way to even the playing field is to jump in when the getting is good, and double up when the situation is favorable (like when you have drawn a ten or eleven).

To be successful with finances, you have to take the same approach.  Life will present you with opportunities to improve your financial situation; you just have to be open to them when they arrive.

If a credit card is charging you a ridiculous interest rate, don’t be afraid to transfer it elsewhere (we did this recently with the Discover 0% card with no transfer fee).  Keep an eye out for promotions where banks are offering free bonuses for signing up, and always search for a coupon before you buy anything.  Don’t be afraid to take side jobs or do online surveys to help bring in extra cash.

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BlackJack Strategy:   Stand When You Have 17 Or Higher
Finance Strategy:      If You Have Debt, Pay it Off Before Investing

In blackjack, the dealer has to keep taking cards until they get to 17.  So if your hand is already there– it isn’t wise to continue and risk taking on more cards.  Doing so will more than likely lead to you “busting.”   When it comes to finances, your goal should also be to avoid busting, which in the real world means bankruptcy.

If you are carrying credit card debt, you know that the dealers (the banks) already have a good hand.  What you need, is a good hand to match them.  It can be a long and tough road to get out of debt, but the payoff at the end is certainly worth it.  While you want to be open to opportunities, you can’t take unnecessary risks that could potentially lead to disaster.  If you still have debt, instead of investing and hoping for a big win, you need to focus on getting rid of your high interest credit card debt first and foremost.  Don’t keep piling on more debt, hoping for a quick fix.  Doing so will just get you closer and closer to busting.

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BlackJack Strategy:  Always Split Aces and Eights
Finance Strategy:      Diversify Your Assets

Blackjack really gives you two methods to even the playing field.  The first is doubling down, which we already talked about.  The second is splitting your hand into two (which requires doubling your bet).   Splitting Aces is an easy one, because it gives you two hands starting at 11 (which is the very best number to start at).  Splitting 8′s is a little bit tougher to swallow, because it involves doubling your investment into a not-very-good hand.  But you will almost never win starting at 16, so splitting is the better option in the long run.

Financially, you can’t be afraid to split your assets into multiple strategies.  You shouldn’t just rely on your 401k for your retirement.  Instead,  setup a Roth IRA and further diversify your investments into bonds and mutual funds.  You shouldn’t just keep your savings in a high-yield account somewhere.  Invest in a home for your family and add some real estate to your portfolio.  By splitting your aces and eights in life, you lessen the chances that you will take a major hit from a market downturn.

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Disclaimer:   Since many of your come to See Debt Run for financial advice, I should note that I don’t advocate gambling as a hobby.  Even utilizing the best possible strategies, if you play long enough– you will lose money.

I Ain’t Sayin’ She’s a Gold Digger

Posted by michelle on Apr 24, 2012 in Minimalism | 31 comments

For the past few months, my husband and I have been working on lightening our load in our home by decluttering, aka throwing away junk that no one uses or even cares about.  There were a few points of contention you may remember, but that minor setback thankfully did little to deflate our esteem.  Just last night, I was going through our Great Works Of Art bin and tossing artwork, drawings, and writing of my boys’ past.  Some things were just too cute to toss, though.  In Kindergarten, my middle child wrote a daily journal with topics chosen by his teacher.  There was so much adorableness contained between the handmade covers of that book that I could barely contain myself.  One particular day’s writing, however, made me question how my child sees his loving mother when the topic was money.  ”I have $115!” he writes.  He goes on to describe his feelings about money; “I like having money.”  There’s nothing wrong with that.  I think, deep down, everyone likes having money.  That part didn’t bother me in the least.  The part that pulled at me was when he went on to talk about me; “My mom loves money!”

What did this mean?  Does my child think I have an unnatural love for the green stuff, or was he just thinking about me in an innocent way and wanted to incorporate his sweet, loving mum-mum into his entry?  I mean, of course I love money!  Doesn’t everyone?  I just don’t know why he thought to write that since I don’t spend a lot of money.  Why not “My dad loves money!” or “Everybody loves money!”  Jeff is the one who actually makes decent money after all.

The sad thing is that he’s right.  I not only love money, but I often worry that we will never have enough.  I recently read (sorry for not giving credit, but I honestly can’t remember where) that Americans feel that making $150,000/yr made you rich.  Upon reading this, I felt a twinge of snobbery flood my veins.  Sure, that’s quite a bit more than we make, but it’s not completely unattainable with some time and hard work.  I started to shake away this silly feeling.  I wondered if this meant per person, and not per household since even at that larger amount, I don’t think I would feel rich.  I definitely couldn’t travel as much as I wanted, buy a yacht, nicer cars, the luxuries for my children including all the sports and ballet lessons my kids would eventually want to try.  In fact, even at $200,000, would we even be able to afford private schools, a weekly maid, tanning and nails, to eat out whenever we had a whim?  Not that I want these lavish luxuries, but isn’t that what rich people do?  Don’t they get to have fun with all that money?  Personally, I don’t care about most of those things, but I do hope to be able to one day save up a decent amount for my children’s education and wedding funds, but unfortunately the prices of both seem to be sky-rocketing at a much faster rate than the economy.  Could even $200,000/yr be enough to fund those coming-of-age adventures for three children with enough to spare for their first cars, their activities and interests?

Yes and no.  Yes, if I’m smart with my money and careful not to let our spending continue to rise with our income; No,  if I decide that I deserve to live like a Real Housewife.  This isn’t so difficult.  If you look at people who actually have money and substantial retirement and savings for their children, they tend to be pretty frugal people.  You’d have to be!  If you plan to retire at the age of 66, but want to live until you’re 86, you better get to work.  I, for one, don’t want to ever become a burden to my children.  I never want them to worry about what to do with mom who spent all her money years ago.  Because of this, I know that I will probably never own a yacht.  I will probably never own a car that costs more than $25,000.  I will probably never own a bigger house than the one we have now.  And you know what?  I’m okay with that and already feel like the richest girl in the world.