Nickeled and Dimed

Today is a milestone for me.   If you recall from my New Years Goals post, my first goal for this year was to pay off the $1,800 remaining on my credit card by February.  Today, one day before February, I made the final payment on my credit card.

After graduating from college last May, I had about $4,200 in credit card debt.  I am now credit card debt free.  And it feels phenomenal!

What does this mean for my personal finances?  For one, it is going to improve my FICO score.  Even more importantly, it frees up $500 to go towards debt and savings.  With every debt that’s paid off, you have that much more money to go towards paying off further debt (or reach savings goals).

Being free of credit card debt is an incredible feeling, and one I plan to have for the rest of my life.  I will never again carry a monthly balance on my credit card.

On to the next goal, paying off my $5,000 loan by June.  This could be derailed slightly due to recent developments at my job, but if it is I will simply re-adjust my deadlines for the goal and keep plugging away.

Please continue sending any personal finance related questions to centsabilitytowealth@gmail.com.

If this is your first time visiting Centsability to Wealth you may want to see what we are about or read our introductory post.

Today at Get Rich Slowly JD posted a fascinating article called “How to Make Your Own Luck“.  In it, he highlights a Newsweek article by Richard Wiseman titled “What it Takes to Survive“.

The Newsweek article talks about the characteristics of people who survive life threatening situations and why it is not simply random luck.  JD’s article takes this a step further and discusses the topic of luck itself.  Here is the highlight of the article:

1. Lucky people frequently happen upon chance opportunities. But this is more than just being in the right place at the right time. “Lucky” people also have to be aware or the opportunity, and have the courage to seize it.
2. Lucky people listen to their hunches. In other words, they listen to their gut instinct. This reminds me of Malcolm Gladwell’s Blink, which argues that often our first instincts are correct.
3. Lucky people persevere in the face of failure. You’ve all seen that Nike commercial from Michael Jordan, right? “I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”
4. Lucky people have the ability to turn bad luck into good fortune. The past couple of weeks have been pretty shitty for me. They’ve sucked. It would be easy to surrender and just give up. Instead, I’ve tried to find the positive, and to build something constructive out of my experience. Instead of focusing on the loss of a close friend, I think, “What can I take from this?” As I wrote and delivered my eulogy, for example, I tried to learn more about speaking in public. (My second eulogy at tonight’s memorial service should be even better.)

The area of “lucky” and more specifically how our thoughts can impact our lives is something that is vastly interesting to me.  And it is something I plan to write much more about in the future. 

Creating and seizing opportunities is something I’m trying especially hard to do right now, as the company I work for is currently falling under extremely difficult times due to the economy and is laying off thousands of people.  I don’t know how secure my job is or if I will still have it next years, next month or even next week.  But what I do know is that I will not sit around and wait for “fate” to decide my future.  I’m doing everything I can to show my value at my current job and exploring outside possibilities as well.  If the day should come where I am next in line for the layoffs, I will be ready with plan B.

My favorite quote is “life is 10 percent what happens to us and 90 percent how we deal with it.  I’m comforted by the idea that I am largely in control of my life and that it is not simply left to pure chance.  If luck is something we create, we all have the opportunity to be as “lucky” as we want to be.

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com

This weeks Open Mic question comes from Curtis Lake, a college studen in Grand Rapids, New York.

I am a daily reader of your site and while I enjoy the articles, they also frustrate me.  I am a college student with an extremely limited income.  Because of this, doing things like saving for an emergency fund, opening a retirement account or creating passive income are out of the question.  What can I do to improve my personal finances when I am making just enough money to survive?

Thanks for the question, Curtis.  How to save when you are barely getting by is a question I hear frequently, and it is certainly a fair one.

First of all, at this stage in your financial life what you don’t do is more important than what you do.  You may not be able to save money yet, but are you avoiding credit card debt?  Are you doing everything you can to minimize the amount of student loans you need to take out?  Simply avoiding debt (or limiting it in the case of student loans) will put you in excellent shape when you graduate and begin making a real income.

Second, have you actually tracked your expenses to see if there is anything you can cut back on?  College is a blast and having fun is important, but could you go out one less night a week and perhaps save that $50 or so a month?  Use Mint (it’s free) and analyze your spending over a three month period.  See where you can cut back on little things.  It all adds up.  Finding even $20 a month to cut out and put towards an emergency fund could put you in great shape when you graduate.

Lastly, is it possible to pick up a part-time job, or pick up more hours if you already have one?  Obviously your studies should come first, and you should still leave time for fun, but if you can pick up even 10 hours of minimum wage work a week you could add $200 or more a month to your bottom line.  And if I said $20 could go a long way, imagine what $200 could do?

I understant the money frustrations of being in college.  It was less than a year ago I was there myself.  But by simply avoiding debt, cutting expenses wherever possible and possibly picking up a part-time job you can set yourself up for a fantastic start financially after college.

What advice would you give Curtis?  What did you do in college to save or earn extra money?

If you would like to be featured on Open Mic, send your personal finance related question to centsabilitytowealth@gmail.com

Technorati Tags: personal finance, emergency fund, retirement, saving, debt

This is the second in a two part series on what the country would look like if everyone suddenly became financially responsible (click hereto read part I).  If this is your first time visiting Centsability to Wealth you may want to see what we are about or read our introductory post.

Yesterday we talked about the short-term consequences of the entire country suddenly becoming financially responsible, and it wasn’t pretty.  With people choosing to pay off all their credit card debt, save for retirement, build adequate emergency funds and make all the other financially wise decisions, the country begins to lose millions of jobs.  The historically high unemployment creates unseen levels of crime and hikes in taxes.

Despite all this, people kept being responsible with their money, with the belief if we could make it through the initial horrors, our long-term future would look much better.

We made it through.  Barely.  Here’s a look at the long-term future of our new, financially responsible economy:

The Job Market

With people saving at least 10 percent of their salary for retirement, the age at which people retire begins to go down significantly.  Soon, most people are retiring in their 50’s.  This helps create a consistently stable job market with positions opening every year for the next wave of workers.

And with people taking control of their own finances, the government begins to save billions of dollars on welfare and unemployment, which they use to infrastructure and energy projects.  This creates even more jobs.

In time, job placement for all college grads nears 100 percent.

The Housing Market

With people only buying as much house as they can afford, and making wise purchases, home prices begin to stabelize.

With no more speculative real estate investing, emotional buying or ARM loans that get janitors into $500,000 houses, the wild swings in home prices cease to exist.  A steady five percent appreciation is seen in nearly all homes.

Those who can afford to buy a house save for a 20 percent down payment and then purchase one within their price range.  Those who cannot afford to buy a house, rent (and pay their rent on time each month).

Other than a few random cases, foreclosures become a thing of the past.

Social Effects

Since financially responsible people are much more likely to tithe, charitable organizations begin to thrive to the point that the government no longer has to help.  Welfare and unemployment are now run through charities with little government involvement and very few people in need of using them.

Poverty is mostly eliminated and while there is still a wide gap between the top and the bottom of net worth spectrum, the difference is shrinking.

Not to be confused with socialism, this new economy still rewards people based on their individual abilities and work ethic, however people unable to make a large income are able to over come their fate with wise financial decisions.

As a result of cutting poverty, crime sees an enormous decline.  Not only does this allow people to feel more secure it again reduces taxes due to needing less law enforcement.

Summing Up

This little two part series on what the economy would look like if we all became financially responsible is based on nothing but my own opinion.  While I do think a lot of it is very realistic, it’s impossible to know what would actually happen  and I am not an economist.

But the point of this is to show that it may not necessarily be a good thing for everyone to become frugal.  Yes, the long-term forecasts look good, but in my opinion the short-term ramifications would be too much to overcome.

The point is that capitalism needs a balance of spenders and savers to survive and thrive.  While I will certainly be doing every I can to become financially responsible and encouraging others to do the same here, it will only work if others continue to spend money.

We are currently seeing the results of what happened when our economy went too far towards the spending spectrum.  A dramatic shift the other way could be just as devasting, or worse.

Please continue sending any personal finance related questions to centsabilitytowealth@gmail.com.

Technorati Tags: personal finance, economy, money

This is the first in a two part series on what the country would look like if everyone suddenly became financially responsible (click here to read Part II).  If this is your first time visiting Centsability to Wealth you may want to see what we are about or read our introductory post.

Every day on Centsability to Wealth we discuss being financially responsible.  From living within your means to paying off debt to saving for retirement, all of us here are striving to be as responsible with our money as we possibly can.  But what if everyone became financially responsible?  Specifically, what if everyone in the United States did the following:

• Paid off the entire balance of their credit card each month.
• Saved at least 10 percent of their income towards retirement.
• Built an adequate emergency fund.
• Bought only what they could afford.

Could Capitalism survive on a population of “savers”?  In a two part series we will examine what the country would look like after such a transformation.  Today we will discuss the short-term, tomorrow we will look at the long-term.  Keep in mind that the results I talk about are based strictly on my opinion and are entirely hypothetical.

Short-term- The Collapse of the US Economy

The short-term consequences of a nation suddenly shifting to being “thrifty”, especially one like ours that has been based so much on spending and debt for so long, would be massive and felt in nearly every sector. 

Unemployment

First and foremost, unemployment would rise to Great Depression levels or higher.  Several industries that employ massive amounts of people would be wiped out by a nation of responsible spenders.  Here are some of the industries most effected:

• Credit Card Companies- Since people are no longer carrying credit card debt, the only profits credit card companies are making are the two percent merchant transaction fees.  They are forced to either drastically change the way they do business, or go completely under.  Either way, enormous amounts of people lose their jobs.
• Pay Day Lenders- This industry thrives off the financially irresponsible, charging triple digit interest rates in order to help people spending beyond their means continue living pay check to pay check.  So when the nation shifts to saving and investing, they are completely wiped out.  And for a business growing faster than fast food restaurants, this means another gigantic hit to unemployment.
• Auto Industry- Already hanging by a thread, the new, frugal version of America puts the nail in the coffin for the auto industry.  With people now waiting five to seven years before buying a new car, and mostly going for used cars when they do buy, auto manufacturers are forced to drastically cut production and lay off significantly more people.
• Fast Food Restuarants- With people scrambling to cut expenses anywhere they can, they start packing lunches for work and cutting out trips through McDonalds drive through.  The fast food industry is forced to close large numbers of restaurants and yet more jobs are lost.

The Housing Market

After seeing millions of jobs lost, an historically bad housing market sees the bottom completely drop out.  Not only do foreclosures begin to double and triple, the renting market also falls out.

As a result of losing their jobs, people can no longer afford to rent homes, much less buy them.  The number of homeless people rises to an all-time high and the lack of home buyers and renters pushes the job losses even higher in the housing sector.

Soon, it is not uncommon to see entire neighborhoods vacant.

Crime

With job losses through the roof, and so many people now fighting to survive, crime rates begin to significantly rise.  While this does create a temporary increase in law enforcement jobs, it also deepens the economic woes severely.

People who are already not going out as much due to being more responsible with their money nearly stop going out all together as the threat of crime increases.  Even less money is spent, and you guessed it, more job loss.

The unbelievable number of people who are now homeless are forced to break into vacant houses and cars in an attempt to survive.  Looting becomes more and more common as stealing becomes some peoples only way to eat.

Taxes

The large increase in law enforcement needed to fight the rise in crime causes the first wave of tax increases.

Next, the massive amounts of people collecting unemployment benefits forces a further hike in the tax rate.  When unemployment can no longer support the unemployed, the government is forced to create more assistance programs, and again raise taxes.

Soon, those fortunate enough to have a job are lucky to be taking home 50 percent of their pay after taxes.

Summing Up

In short, the short-term effects of the entire nation become financially responsible are devastating.  The level of unemployment alone could be enough to break the economies back for good.  Those who do survive the job cuts are forced to spend a huge portion of their salary supporting those who weren’t.  The threat of crime eliminates most venues of entertainment outside the home.

Tomorrow we will look at what the long-term future of the new economy would look like if we were able to survive the horrific short-term.

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com.

Technorati Tags: personal finance, economy, money, unemployment

Store discount cards can be a great way to save money on anything from groceries to books.  But if you are like me, you have so many of these cards that you lose them, forgot which ones you have and rarely use them.  Off the top of my head I have store discount cards to Acme, Giant Eagle, Barnes and Nobles, GNC,  Amazon, Best Buy, Office Max and American Eagle.  If there were a way to store all these cards on just one card, I would be much more likely to use them and take advantage of the savings.

At Just One Club Card, you can do just that.  They allow you to save up to eight different store cards on a single card that will be accepted just like the original card.

How it Works

Using Just One Club Card can be done in four simple steps:

1. Gather up to eight store cards you would like to load to just one card.
2. Log on to www.justoneclubcard.com.
3. Type in the bar code for each card and choose which store or club it belongs to.
4. Print out your new card.

After printing out your new card simply store it in your wallet or purse and you will never have to carry around the other eight cards again.  By reading the bar codes saved on your Just One Club Car, each store can access your account without the original card.

Store and Club cards can be an excellent way to save money on both necessary and discretionary expenses, but only if you use them.  By organizing all the different cards on to one card you are much more likely to take advantage of the savings.

Give Just One Club Card a try and let us know if you used the savings more often.

Please continue sending personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com.

Technorati Tags: personal finance, Just One Club Card, savings, money

Here are my favorite stories from other personal finance blogs throughout the week.

At Get Rich Slowly, JD had an excellent article on the difference between the Warren Buffets of the world and the Donald Trumps, ultimately asking “which America” we want to be.

Ramit at I Will Teach You to Be Rich did a 40 minute video on mentoring, writing effective emails and the financial crisis.

Lazy Man and Money had a great guest post from Studenomics on dispelling common finance myths when it comes to college.

All Financial Matters had a guest post called Stacey’s Guide to Saving Money which highlights six steps to saving money.  It is a great read.

Check out these personal finance articles from the past week and let us know of any other good ones you have read recently.

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com.

CTW reader Tim Crooks forwarded me an email from an attorney with tips for protecting your identity and on what to do if your wallet, credit card, social security card or anything else containing your “identity” is stolen.  Since protecting your identity is a pretty crucial part of your finances, I thought it would be a good thing to share here.

Here are the seven steps to protecting your identity:

1. Do not sign the back of your credit cards . Instead, put ‘PHOTO ID REQUIRED.’

2. When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the ‘For’ line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won’t have access to it.

3. Put your work phone # on your checks instead of your home phone. If you have a PO Box use that instead of your home address. If you do not have a PO Box, use your work address. Never have your SS# printed on your checks. (DUH!) You can add it if it is necessary. But if you have it printed, anyone can get it.

4. Place the contents of your wallet on a photocopy machine . Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place.
I also carry a photocopy of my passport when I travel either here or abroad. We’ve all heard horror stories about fraud that’s committed on us in stealing a Name, address, Social Security number, credit cards.

5. we have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where your credit cards, etc., was stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).

But here’s what is perhaps most important of all: (I never even thought to do this.)
7. Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the internet in my name.
The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

Identity theft is one of the fastest growing crimes in America right now.  Having yours stolen could do major damage to both your finances and your FICO score.  By following the steps above you can help prevent your identity from being stolen and limit the damage done if it is stolen.

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com

Today I’m posting this from my brand new, top of the line, HP laptop computer.  Along with the computer, I purchased the two year full warranty, which fully covers any damage to any part of the computer at no cost to me.  The total price I paid for all this?  $83.59.

That’s about a $900 value for $83.59.  How did I get this great deal?  By purchasing the same full warranty when I bought my last computer three years ago. 

Looking back on that purchase three years ago, I can’t believe how foolish I was.  I was a college student who had a fully functional laptop that wasn’t cool enough anymore.  Being the money ignorant person I was, I went out and replaced this “uncool” computer with a $1,200, all gimmicks included, no expenses spared Gateway laptop.  And to top it all off, I put it on a credit card because I couldn’t afford it.  But in all these dumb decisions I made one great one, I spent the $300 for a full coverage three year warranty.

In the two and a half years I owned that computer, I took advantage of the warranty six different times, including this final time which resulted in a new computer.  Here’s the break down of the money I saved on each of the six times I used the warranty:

First use: Replace battery and power charger- $125

Second use: Replace battery and power charger- $125

Third use: Replace screen- $300

Fourth use: Replace battery and power charger- $125

Fifth use: Replace battery and power charger- $125

Sixth use: Replace entire computer- $900 value - $83 paid = $817 saving

Total Savings: $1617

In two and a half years my $300 investment resulted in a 500+ percent return.  Show me another investment offering that kind of return right now!

And I don’t think my experience with my laptop was outside the norm.  My first computer was repaired under warranty three different times, one of which required the entire hard drive being replaced.  My fiance, Courtney, computer has been repaired four times and will be going for its fifth time this weekend.  In all three cases the warranty paid for itself many, many times over.

Warranties are tricky.  A lot of personal finance experts will tell you to avoid them, that they cost more than they are worth.  While I think this may be true for a lot of products, I will never buy a computer (especially a laptop computer, which is even more fragile) without purchasing the full warranty.

Do you spend the money for the warranty when you purchase a new computer?  What about other products?

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com.

There have been plenty of articles out there the last few days about how President Obama will impact your finances.  From cutting taxes to creating jobs, people want to know how Obama will help, or hurt, their financial situation the next four years.  I have even received two different questions from readers asking how I think the change in Presidents will effect our personal finances.

My answer?  Very little, if any.

First let me say that this is not a political blog.  You will never hear me support or cut down any political party on this site.  So if you are looking for a place that will tell you how good or bad Obama will be as president, this isn’t it.

But even more important than that, I don’t believe the President has much of an effect on your personal financial situation.  Regardless of the tax rate or the economy, the equation for financial independence remains the same, spend less than you earn.

My advice for adjusting to the new Oval Office?  Continue paying off debt.  Continue building an adequate emergency fund.  Continue saving for retirement.  Continue looking for ways to cut your expenses.  Continue making smart financial decisions.

There have been 43 different Presidents before Obama, and not one of them have managed to change the principals of financial prosperity.  The 44th President will be no different.

The President of the United States has plenty of responsibilities, managing your finances is not among them.  You will ultimately determine your financial fate.  Regardless of your feelings on President Obama, choose to make the next four years the best of your life financially.

Please continue sending any personal finance related questions, suggestions and tips to centsabilitytowealth@gmail.com.