Monday, April 07, 2008

Monday, March 31, 2008

How I don't overspend on a CC

As I drew up a complete budget, I've tracked my spending for 2007, detailed all money spent on a CC or cash, and finally I understood what my percentages are. I realized why I always say people can use a credit card but not overspend if you are controlled. Because we have a built in control using our budget. What?

Well I've realized that 55% of our income is gone pretty much before we see it. Then another 30% is gone to housing, a conscious decision. So 85% of our income is gone before we have a chance for it to really be seen even as cash from auto-debits. It is invested, saved, gone to bills.

So I have 15% of our income to really play with in our checking account. We now take home less than what we did when we were both graduate students and making 1/3 of what we make now! Crazy! Of that 10% goes to fixed monthly bills. Bills which we've agreed to pay and decided is important to our lives. So we spend 5% of our income a month as choose in "fun".

Our 10% includes things like homeowner's dues, car insurance, car tax, electricity, cable/internet/phone, natural gas heat, cellular phone plan, pet health insurance and food, and blow allowances. The electric and gas are on budget billing with it's respective company so I use that amount and it works out well.

Now some of these bills are auto-debited on a credit card, but they are budgeted as a fixed amount. So I have 10% of monthly fixed obligations, which can be decreased if we lost our jobs and needed to tighten our belts, such as cable, internet, etc, but which we have deemed currently as important and necessary to our current lifestyle.

Strangely it's even how I ranked them in our budget unthinkingly. Our budget goes Income, pre-tax savings/deductions, taxes, after tax savings/deductions, fixed expenses, and variable expenses. Everything I mentioned goes in the fixed expenses with the mortgage, property taxes, insurance.

Food, eating out, entertainment, fun, personal care, clothes, etc are all variable amounts. I get 5% with which to prioritize my spending. These are charges on the credit card. I have a dollar amount monthly with which I can spend on whatever categories I see fit. I have "budgeted" amounts but I don't have to stick to them as long as I stick to the monthly 5%.

I realized this is something we've done since forever. This is how we've always budgeted and paid CC in full. We never really have had a lot of variable expenses. Most of our expenses have been "pre-set" even if paid for by a credit card. We view them as a monthly obligation and not "our" money.

During my 2 month cash experiment, all our fixed bills were still paid by credit card or auto-debit. Nothing changed except my 5% was in cash. It made me way more frugal in a negative way, because I refused to buy groceries then ended up spending more $$$ to compensate afterwards to restock the pantry. A more appropriate behavior would have been to just use the cash naturally and grocery shop every week instead of trying to go 4 weeks without shopping (I spent less than $100 for 3 adults in a month, it was ridiculous). I also specifically did not eat out because we didn't want to spend the cash.

But now that I have my cash data, my budget percentages, I realize that I don't have a real problem overspending because I don't have much money to overspend with. I consciously have $X/month. I know I have $X going to savings for specific target funds (tuition, property taxes, etc) and those funds are untouchable.

Because of this I don't have large CC bills. On average probably $1k/month including all fixed expenses charged and variable expenses. But my budget busters come when we pay for DH's tuition on a credit card and slam down $25k/year (but at 5% back who wouldn't use a credit card?).

So while CC aren't making me rich, they are helping with my frugal behavior. So I guess this is my personal plan on how not to overspend on a credit card. I have a lot of fixed expenses, hence 95% of my income is gone before I can have fun. I do realize that part of my fixed expense are for fun and it's ironic I only consider 5% fun money.

My plan is to one day have 50% fixed expenditures and 50% fun money. But I'd have to make a lot of money to do that!

Practical Applications of the Credit Crunch

Because of the move, here's a guest post today by Jonathan @ MasterYourCard. We traded posts a while ago, here's mine, but I was saving his for my move. This is a wonderful treat and the start of reading guest posts by people from the PFBloggers. A new perspective on the credit crunch. Enjoy!

Practical Applications of the Credit Crunch

Few of us need to the government to tell us what we already know – we’realready in a recession! Every day it seems the price of gas and food goesup, while the value of our homes and the buying power of the U.S. dollargoes down. Banks and other lending institutions continue to tighten theavailability of credit to help protect them from the weakening economy. Even though you may think that some of them might not affect you directly,you should be aware of some of the direct and indirect effects of the credit crunch on your family and your pocketbook.

First, banks are tightening up their lending standards for the consumerborrower. Whether it is for secured loans (homes, autos, etc.) or for unsecured loans (credit cards, signature loans) the availability of credit is becoming scarce. Only those with stellar credit profiles are finding many lending institutions willing to offer them loans of any type. Those who have credit histories with blemishes in them may find the credit spigot being turned completely off for the time being. What can you do tolessen the impact? Consider putting off major refinancing or debt purchases for the time being. Work on paying your debt down instead of trying to obtain new debt.

You may already be noticing that the credit card companies areaggressively reviewing their portfolio of accounts. Card issuers are closing accounts and increasing interest rates even as the prime rate(which most APR’s are tied to) decreases. Again, your best bet here is to make sure those payments arrive on time every month. Don’t apply for new credit cards and keep your balances low. Card issuers are looking for anyreason whatsoever to raise your interest rates – don’t give them a reason! If you think you may be heading for some financial turmoil, call your card issuers and start working with them ahead of time instead of putting off the problem until it is too late. Many are more than willing to help you manage the payments instead of letting you default – which means another loss for them.

You are also being affected in ways that you can’t see directly. Businesses use credit the same way you do and when they have trouble obtaining credit you can feel the impact through higher prices and stricter payment terms.

One example is the student loan industry. Student loans are financed by selling the loans on the open market. Recently many student loan providers have had no bidders for their student loan offerings – this is having a rippling effect through the entire education and student loan system. Some student loan providers are simply not writing any new loans. If you are a child or parent of a child attending attending college make sure you get your FSA(Federal Student Aid) profile submitted early. With less money to go around you need to make sure that you are first in line for whatever aid might be available.

Nobody knows for certain how long the economy will remain depressed; the best bet during tough economic times is to put off major spending and focus on repayment – a good task no matter what the economy is like. Keep your eye on the mail you get from your lenders and credit card issuers tosee what rate changes may be affecting you directly. If you are affected consider taking on, even temporarily, a second job to pay off the debt. You’ll find that by getting rid of debt and building your credit profile up that no matter what the future may bring for the economy you’ll have one less thing to worry about and a lot of extra money to go towards the things that make a difference in your life.

Site Moved

My new site is www.livingalmostlarge.com Not in perfect shape yet, but it's coming along. I'll be switching feeds no worries. I also will be publishing here for a couple days.

Thanks!

Sunday, March 30, 2008

Moving Site

I am in the process of moving my site to a self-hosted site. Please bear with me as I try this out. I am unfortunately slower than most people because I have no idea what I'm doing. Trying to get it up and running as we speak.

Friday, March 28, 2008

Free Upgrade or Downgrade?

I have to laugh about this because it's so dumb. DH is away on business and signed up to rent a compact Ford Focus. Got a great deal with budget rent a car, and was planning staying an extra day to go snowboarding.

Well last night he got in and was informed that they were out of compact cars. Great he says give him whatever they've got, as long as it's the same price. No problem. They say they'll upgrade him for free. Sound good right?

Well turns out the smallest car they had available was the Ford Edge. Which while, roomy and spacious, is a horrible gas guzzler. I had to laugh because they thought they were doing DH a favor by upgrading him to a larger car. When it turns out he'll end up paying way more in gas. Sigh.

And the lady behind the desk said "You need an SUV to go snowboarding. How did you expect to get there in a Ford Focus? It's only a 4 cylinder." DH didn't bother correcting her that we go boarding all the time in a Focus or Corolla.

Moral of the story? Sometimes a freebie ends up costing you more!

Oh well, at least he got a car. And he tells me that driving such a huge SUV, is sort of very manly. I told him "get your fill, we're not driving a gas guzzler anytime soon."

Thursday, March 27, 2008

Store Credit Cards - Yea or Nay?

I guess as a follow-up to "my secret shame" is the question "are store credit cards - yea or nay?" I've got 4 and I am not sure I should cancel them or not. I don't use any but I do get some nice coupons from them.

I know exactly why we got two of the cards, we had just bought our first condo and needed to buy a washer/dryer/fridge and paint supplies. So we got a 10% discount on both purchases from Best Buy and Home Depot respectively. We saved $100 on the washer/dryer/fridge and had 18 months 0% interest. We paid it off on schedule. For our home repairs we saved $75 and had 1 year of 0% interest. This was back in 2002. I think we didn't cancel the cards after we paid them off because they kept sending us coupons. We still do get coupons like $10/50 at home depot, or $5/15 at Best Buy. So though nothings been charged in many years on the cards, we still have them.

The Gapcard I have no excuse. I think I got it back in 1998 and haven't used it since. But again they have lovely coupons. Though I'm less likely to use the coupon than either BB or Home Depot.

Finally we just got a furniture card this summer with our new couch. We had $100 coupon savings on the couch and 0% interest. It's paid off but they wouldn't take the coupon without using a credit card and no I asked they wouldn't give discount for paying cash. I either live where people don't give cash discounts or they don't give discounts either way. Anyway this card is still open because it too gives nice coupons. I have coupons for $100 furniture, and for cheaper IMAX movie tickets and food. Nothing I want to see, but I'm hoping to get more movie tickets for Batman this summer.

But are these the reasons people like store cards? Are they not using them but hooked on getting the coupons? Or do they actually shop there? I have to say we actually shop a lot at home depot. The other stores not so much, although everytime a $5/15 comes our way I buy DH a itunes gift card at Best Buy.

So I'm undecided whether store CC are yea or nay. What do you think?

Wednesday, March 26, 2008

My Secret Shame

So I have a secret shame. One which I hadn't even realized until yesterday. I am an avid credit card user and have been very responsible about using it like a checking account. No late fees, no overcharges, no interest. All bills are paid in full.

But the secret shame? Well guess how many credit cards I have? I decided to count yesterday, drumroll please. We have at least 14 cards between the two of us that I know about. Ouch.

My secret shame is I haven't cancelled a credit card in years. I don't exactly know why not either. We've got 4 store credit cards (BB, HD, Gap, Jordan's), none are in use, but I do get coupons for having them.

For the other 11 cards, well DH and I each have a individual american express, discover, and visa, probably because we were trying to build his credit so he got his own cards years ago when we first meet. That's 6 cards, and the other 4 are joint cards. We definitely use 2 mastercards, one exclusively and the other as a backup if we max out our rewards for the year.

I think that's the problem. We couldn't settle on a backup card for our usage. I am considering getting a Citibank CashReturns Card which gievs 5% back for 3 months. Because I am charging DH's tuition to the tune of $15k. Hence 5% back is $750.

But until I sit and discuss with DH what we should keep or cancel, I guess I have to live with the secret shame. Also I will probably need to pull our credit reports to check everything out. So how many credit cards do you have?

Tuesday, March 25, 2008

An Envelope Budgeting System

I was asked to Beta Test a New Envelope Budgeting System. It's called IntelliPenny. It should be an interesting trial. I'll post a review when I use it for a bit, starting this weekend. But for now please read about it in a post from the creator!

IntelliPenny

Introducing a new software program to help keep track of your personal finances! IntelliPenny helps you manage your bank and credit card accounts and allows you to budget using the envelope system. It simplifies the task of allocating money to envelopes through a process of automatic envelope deposits. IntelliPenny also helps keep spending in check by using a wishlist to track items you hope to purchase in the future. This can help eliminate many of the impulse buys that eat away at income. Do you like to use your credit card for day-to-day purchases and then pay it off at the end of the month? We call this using your credit card like a debit card. IntelliPenny makes using your credit card like a debit card a breeze. Customizable reports, bill payment tracking, transaction importing, password protection, data file backup, are just a few of the other features that IntelliPenny contains. Visit Intellipenny to download your own copy or for more information.

Guest Post @ Master Your Card

I wrote a guest post last week for Master Your Card. A blogger part of the PF Blogger Forum. Please check it out here. I will post it later this week as well.