Tag Archives: money

How Much of an Incentive Do You Need to Take Action?

I constantly see advertisements encouraging me to switch banks or get a new credit card. Get $300 in cash back, get a free round-trip flight, and even Lending Club tells me that friends will get $200 just for signing up and funding their accounts.

That’s great if you were already planning on switching banks or if you’re already in the market for a new credit card, but what if you’re not. At what point are you willing to take action? $100 probably isn’t enough as I see these types of deals all over the place. For credit cards it makes even less sense. The temporary hit to your credit probably isn’t worth $100, but what about for a round-trip flight? Would saving $300 on flights be worth getting a credit card even if you don’t need it?

Most of the time I pass on these types of deals. Actually, I always pass on them. But lately I’ve tried to convince myself that it would be worth it. I only have one credit card, another one definitely wouldn’t hurt me, and with up to 3% cash-back rewards out there, there aren’t many downsides.

It’s much harder to judge when what you give up is not time or money. If it means a little more hassle (remembering to cancel a credit card before the yearly fee kicks in, having to use a debit card 10 times a month, having to change your direct deposit options at work), where do you draw the line?

Some people will do crazy things just to save money. The most recent example is the woman who pepper sprayed other shoppers just to get a better price on an Xbox 360. Maybe she would save $50, but now she has a legal battle and a ton of embarrassment on her hands. Probably not worth it in retrospect.

For me, I keep great records, but I still like to simplify everything. I don’t want to have to worry any more than I already do, so changing bank accounts, even for $100, isn’t something I’m interested in. And I don’t want to open multiple credit cards because I don’t need them, so there’s no hurry as these offers are constantly available. So for now I’ll stand pat and give up that flight, but maybe in 6 months when I want to take a trip I’ll feel differently?

Readers, what are your limits? At what point do you start to take action instead of sitting back and letting opportunities pass you by?

What Do You Like About Money? What Do You Hate About It?

In the personal finance blogosphere, it’s pretty clear that we’re all fans of money. We like it, we want it, we need it.

But have you ever put into words what you like about money? And have you thought about the things you hate about money?

This week, I’ve been asking bloggers and friends for their thoughts on money. I just asked two simple questions and here are the responses I got. Feel free to add yours in the comments.

“What Do You Like About Money?”

  • Leah – I like the independence it promotes.
  • Laurel – I like that it gets you things.
  • Shira – I like the color
  • Ezra – I like how it smells and feels
  • Mira – I like that it buys stuff
  • Financial Samurai – I like how having money eliminates the stress of not having money.
  • JT McGee – Turning it into more money. It’s a game.
  • Noah Krueger – Freedom. Opportunity. Goal-setting.
  • Darwin’s Money – Options. Flexibility. Peace of mind.
  • Dr. Dean Burke – I love the freedom of choice having money gives
  • Lauren – I like the things I can buy with it, I feel a sense of power when I have money.
  • Katy – The color.
  • Adam – I like the color.
  • Kfir – That comfort of knowing that if theres anythign I need, I can get it, be it a necessity or a luxury.
  • Angry Millionaire – It allows me to live.

“What Do You Hate About It?”

  • Leah – that it makes people selfish and greedy and feel superior and makes others feel inferior for lacking it.
  • Laurel – That it limits you, everything requires it, and the value doesn’t stay the same.
  • Shira – Hate the texture.
  • Ezra – I hate earning lots of money and having to save it and not spend it.
  • Mira – Hate that it’s stressful.
  • Financial Samurai – I hate how money changes people, often times for the worse.
  • JT McGee – That people don’t understand money as a means of commerce.
  • Noah Krueger – It’s ability to turn me into a corrupted, unloving person in general who will put making money above cultivating relationships.
  • Darwin’s Money – When people do bad things in the pursuit of money. Wanna hurt yourself? Fine. Hurting others is the problem.
  • Dr. Dean Burke – I hate how badly I choose with that freedom at times!
  • Lauren – Hate that change is filthy and disgusting.
  • Katy – What it can do.
  • Adam – I hate the taste.
  • Kfir – That I always want more and how necessary it is to live a comfortable life.
  • Angry Millionaire – That I have to give it away.
  • Melissa – Hate that it’s stressful.
  • Benny – I hate that ATMs only dispense $20 bills, breaking change is annoying.

Readers, what do YOU like about money? What do you hate about it?

Mailbag: 5 Steps To Get Out Of Debt

I received this email from “Alan,” a 24 year old who was just hired after being unemployed for 8 months after graduating college.

I am in $15,000 of credit card debt and got a job that pays $60,000/year. I was living with friends without really paying rent and now that I’m moving out into the real world, I have no idea what to expect once I get there. I have to pay for rent, utilities, food, and car payments, I’m not sure how much I should set aside for debt, retirement, and savings. How should I allocate my funds?

Alan seems to be in a fairly similar position to me, although his credit card debt is likely accruing interest at a faster pace than my student loan is. I would recommend 5 steps to get started building savings and tackling the debt.

1. Track Expenses

Go right now and sign up at Mint.com. It’s hard to predict exactly how much you’ll spend on lunch with co-workers, fun, and other expenses. Don’t worry about creating a budget just yet, but be responsible with your purchases. Keep in mind that you’re in debt and are trying to get out.

2. Build $2,000 Emergency Fund

After paying the minimums on your credit card, throw everything else into an emergency fund. Some people suggest that $1,000 is enough to get started, but the truth is that $1,000 may not cover what you need. If something happened to your car or if your job doesn’t work out for some reason, this is what you’ll have to rely on. $2,000 should provide you enough of a cushion at the beginning, and after you have that much, keep contributing a small amount each month to give yourself more to fall back on. Every few months, check back on this emergency financial file and keep adding because as you work more, you’ll have higher expenses and will need a bigger cushion.

3. Build A Budget

Once you have an emergency fund, it’s time to see how much you can afford to throw at the debt. Use Mint to build a budget based on your expenses in the first 2 or 3 months, and cut out what you can. Stick to your budget and you’ll see the debt decrease.

4. Aggressively Pay Off Debt

Anything you have left over after expenses and what you put into the emergency fund, write a check to the credit card company. This number will fluctuate depending your living situation and city you live in, but more you pay now, the less you’ll pay overall. Imagine the feeling of being debt free!

5. Work Hard

While focusing on getting out of debt is great, keep in mind that it will be a slow process. Over time, the mound of debt you have will decrease slowly and surely, but it shouldn’t be all you think about. Focus on your job. Improve yourself, work hard, and get noticed. If the debt is gone but you don’t have a job, then you’ll be right back to where you started. The best thing you can do is to do you job well. Having that job will be much more valuable than the emergency fund.

For now, I am going to suggest passing on the retirement savings because the interest rates on your credit cards are likely higher than the rate of return you’d get in your retirement account. Once you have the debt taken care of, you can start pouring all that money you were using to pa off the debt and instead use it to build a healthy emergency savings account and retirement fund.

What other steps should Alan be taking to get out of debt?

If you have a question you’d like answered, please don’t hesitate to contact me!