Tag Archives: spending

How to Choose Credit Cards With Rewards to Save Money – Part 1

This is a guest post by Mr Credit Card from www.askmrcreditcard.com. Mr Credit Card reviews credit cards on his site. He also has a blog and you can subscribe to his blog here. Mr Credit Card will post a 2 part series on how to choose a credit card with rewards to save money on your spending.

Hi everyone! Firstly, I would like to thank Adam for the opportunity to guest post on his blog. Friends of mine inevitably ask me what credit card they should get when they find out that I actually run a credit card review site. This is a tough question to answer without first finding out about someone’s spending patterns. But the thing that always makes me shake my head is that fact that folks who pay in full every month carry a “vanilla” Visa or MasterCard. Worse of all, some even pay an annual fee to do so. If you pay your balance in full (or carry only a small balance occasionally), then you should be making money from credit cards by a getting a reward card, instead of letting credit card companies make money from you. It should be a two way street.

But how does one go about doing it? First, you have to be aware that there are two types of rewards. There are cash back credit cards that will pay you a certain percentage of cash rebates for every dollar that you spend on the card. Then there are rewards credit cards. These cards allow you to earn points or miles for every dollar that you spend on the card. You can then redeem your points for things like airline tickets, merchandise, gift cards etc.

Cash Back or Rewards?

The first decision you have to make is whether to choose a cash back card or a reward card. For this, the decision really comes down to preference. What sort of rewards do you prefer? Many travelers who fly frequently prefer to get an airline credit card with their favorite airline. Many folks who do not travel and do not want the hassle of redeeming points prefer to earn cash rebates instead.

How Do You Choose a Cash Back Credit Card?

For the rest of this post, I’m going to focus on explaining how I think one should go about choosing a credit card that pays you cash rebates. In part 2 of this post, I’ll focus on how to choose a reward card instead.

The first thing one has to understand is that different credit cards have different cash rebate formulas. And for someone who is researching it for the first time, it could be rather confusing. But here are the few features you have to be aware of:

Vanilla standard 1% formula – The vast majority of rebate cards fall into this category. They will pay you 1% rebate for every dollar that you spend on the card. While this looks like a decent deal and much better than a standard vanilla card, you can get better deals out there.

More than 1% on certain categories – These are the type of cards you should be looking at although there is less of them these days as credit card issuers cut back on the rewards they give. There are cards out there that pay more than 1% on certain categories that you spend. For example, a card like the American Express Costco Card pays 3% on gas, 2% on travel and restaurant spending and 1% on other regular stuff.

Rebates for online shopping – Some cards like Discover Card allows their card holders to earn between 5% to 20% if they use their card to shop at over 100 online retailers through their site.

Tiered Formula – Some cards also have a tiered formula. That means that you need to spend above a certain amount to earn more rebates. As an example, the Amex Blue Cash lets you earn 1% on gas, supermarket and drugstore spending for the first $6,500 of annual spending. Once you pass that threshold, you earn 5%. Having a tiered formula is not necessarily bad. It just means you have to use your card above a certain amount to fully make use of it.

How to Choose the Right Card For You

1. Figure out how much you spend on your credit card – Yes, go through your credit card bills and figure out how much you actually spend on your credit card.

2. Break down your expenses into different categories – The next step is to breakdown your spending into different categories. You should use the following breakdown as a guide:

Gas
Supermarket
Drugstore
Travel
Restaurant and Dining
Movies
Home Improvement
Others

3. Calculate rebates you can earn on different cards – Now comes the tough part. You have to do some research on the different cards available and use a calculator and figure out how much you will save from using each card. Then, once you are done with this exercise, you will know which is the right card for you. To make your life easier, I have actually created a cash back credit card calculator to save you time. All you have to do is to simply key in your monthly expenses in various categories and the calculator will show you the top 3 cards that will earn you the most rebates.

OK – that’s it for this post. In part 2, I will write about the different types of rewards that are available in reward credit cards, whether you should choose a frequent flier card or a regular reward card and other things to look out for. Remember, you should extract as much benefit as you can from credit cards and not the other way round.

Carnival of Twenty Something Finances – DC Edition

Welcome to this weeks edition of the Carnival of Twenty Something Finances! Last weekend, the future Mrs and I headed down to Washington, DC to check out the famous cherry blossoms. Although it was VERY crowded, I must admit that it was an amazing time to see them. DC is a great place to see on the cheap. Most museums in the city are free and they have a great transit system. Personally, we parked outside of the city at one of the free metro stations and rode the train all day. It cost us about $5 per person and we did not have to deal with the horrendous traffic and confusing streets.

Sprinkled throughout the carnival this week are some common places to see while visiting DC. Like I mentioned before, most of these sites are free to the public. You can get away with spending very, very little compared to other cities. I advise packing a lunch for you and your family as food can be rather pricey if you purchase it from vendors. Anyway, off to the carnival!

This is a picture that we took in the midst of the trees. The cherry blossoms were at their peak this year from around March 28th through April 12th.

Editor Picks

Debt Kid shows you that getting a mortgage after foreclosure is not so simple.

Debt Ninja at Punch Debt in the Face wants to know what’s your favorite dumb but fun expense? I would have to say that mine was my iPhone. I love it with a passion but I really do not need all of the features and the added expense.

Jerry at Deal Supermarket talks about getting unplugged with frugality. This was a very creative post!

DR at The Dough Roller gives you 10 tips to declutter your finances.

The Washington Monument is the most prominent structure in DC. It was built in 1884 in honor of George Washington. It’s free to get in but make sure you get their early!

The Rest of the Field

KC Lau shows you 5 ways to take charge of your finances.

Fabulously Broke in the City shows you why a small space does not mean you put your life on hold and whine.

Bank Savings Review let’s you know about four banks that gave their TARP funds bank.

Kathryn at Out of Debt Christian has the top ways to waste money on your home.

Shaun from Learn Financial Planning shows you why being frugal is just the first step.

SVB at The Digerati Life helps you choose the best online stock brokers for cheap stock trades.

Personal Finance Analyst wants to know if saving money damages your quality of life.

Patrick at Cash Money Life tells you when you should tell your boss that you are pregnant.

The Smithsonian Institution has a ton of great free museums to see in DC. You can go to the Air and Space Museum, Museum of Natural History, Freer Gallery of Art, etc.

Mr CC at Ask Mr Credit Card let’s you know how American Express submits your credit information to the credit bureaus.

Matt at Fine-Tuned Finances compares new credit card programs for saving for college.

Ginger at Ginger Won’t Snap has some credit card fraud problems.

Peak Personal Finance has 3 smart personal finance tasks that you are probably putting off.

Diego at Bankling shares with us his top 50 economics blogs.

Big Cajun Man at Canadian Personal Finance Blog has some advice for new grads.

Patrick at Money Saving Deals gives us the lowdown on how to get up to $150 from TradeKing.

RJ at Our Financial Planner shows you the miracle of compound interest.

The Lincoln Memorial is another great (free) site to see in the city.

MoneyNing shares with your his review of Everbank.

Jeff Rose at Good Financial Cents let’s you know what to do if there is a layoff pending.

Destroy Debt shows you how to get the last drop out of many popular products.

Pinyo at Moolanomy shows you how to transfer credit card balances.

Raj at DebtGoal is cutting the bill on digital services.

Wren at True Adventures in Money Hacking shows you how to get a free car. Really!

Dan at Everyday Finance gives you the best CD yields in April.

Jim at Bargaineering shows you how to pick the best credit card.

J Money at Budgets are Sexy gives some advice on Roth IRAs vs 401ks.

Visit Arlington National Cemetery and pay your respects to the thousands of fallen soldiers. You can also view the resting place of JFK and see the Eternal Flame.

Patrick at Military Finance Network shows how the stimulus plan assists military members affrected by the mortgage meltdown.

Credit Card Assist wants to know if you have ever looked at your credit card closely.

Apply 4 Credit wants to know if credit card protection plans are really worth the added cost.

Christian Personal Finance is giving away a free subscription of Kiplinger’s personal finance.

Investing School compares Etrade, TradeKing, and Zecco.

Mike at Money TLD lets you know that some expired foods can still be edible.

Eric at Twenties Money has five pieces of advice for twenty somethings.

BillEater shows you how to avoid debt reduction scams.

Kyle at Suburban Dollar gives you his review of CashCrate.

12 Questions With Deena Katz – Top Financial Planner

While attending Graduate school at Texas Tech, I had to opportunity to learn from one of the top financial planners in the country, Deena Katz. Deena has been in the business for many years and is recognized as one of the best CERTIFIED FINANCIAL PLANNERâ„¢ Professionals. She was recently named one of Financial Planning Magazine’s “5 Most Influential People in the Planning Business”. She is also the author or co-author of nine books on financial planning.

I appreciate the time that Deena took out of her extremely busy schedule to answer our questions. Here is the list of questions that I asked her. These questions include some of my own as well as some from readers. Deena has some great insight in her answers and I hope you appreciate her input!


YMR: What drew you to financial planning and how does it enhance your life?

Deena: My mother was a minister and a social worker, but when my father died at 39, it became clear that she was unprepared for the financial burden.  She taught me early on to be able to take care of myself, because there is a high likelihood that I would be taking care of myself at some point in my life.  That led me to the planning profession.  My first company was working with women in transition.  It is extremely fulfilling to see people learning to take financial responsibility and accomplishing their goals.  I’m passionate about it.

YMR: Why do you think many individuals are scared about the thought of using a financial planner? What can the industry do to fix this problem?

Deena: There have been some very bad incidents in past years (Madoff and Standford most recently) which have shaken the trust and confidence that people had in advisors.   This is a two-sided problem.  Many people do not have the education to recognize if something is not right, some are looking for investment opportunities that are just too good to be true.  A little greed and a little vice make a big mess.  I always tell people “Never let anyone care more about your money than you do.”  On the other side of that, I believe people should work with CFPs, who are bound to standards of ethics that are quite rigorous.  I also believe that advisors should act as fiduciaries (in the best interest of the client.)  When looking for a planner, ask how they work, how they are paid and if they are a fiduciary.   Then you can begin to develop trust.

YMR: How have you been calming down your clients over the past year? Did you have them well prepared for an event like this?

Deena: No one is really prepared for an event like this.  It’s a 6th standard deviation event.  But, if we are able to manage client expectations from the first minute they work with us, we have a better chance to keep them from jumping ship when things are rocky.  As advisors, we can never promise market returns, we should be exploring the downside of investments with them.  We should be able to “stress test” their plan, to demonstrate how bad things really have to get, before their plan is unworkable.  We need to keep them informed of what is happening in the markets, in congress, and in the economy so we can give them “our take” on it and how it affects them personally.

YMR: Do you think this economic climate will finally get people to realize that debt is bad and retirement saving should be a priority?

Deena: No.  I don’t think many folks really understand.  I am hoping that congress will start to help us focus on financial literacy so that young children get this education to prepare them for life, rather than stumbling through it, making grave mistakes, then trying to “right” everything before they retire. I think people are paying more attention, but I am not sure they have been taught successfully yet.

YMR Reader: Do you think budgets are a sexy thing right now?

Deena: I have always felt that budgets are a four-letter word…but “sexy” is not the word I think of.  The nature of many human beings is not to feel the constraints of budget, because you fight against them, the same way you fight against your parents when you are 15.  I believe in  “trade-off” spending.   The first thing you need to know is how much does it cost you to live-basics, like rent, utilities, etc.  Then you look at the variables-eating out vs. eating in, for example.   Then you can say, “I’d like to buy a new car, so if I eat in and shave off some other expenses, I can us that money to buy the car.”   With budgets you are managing money, but with trade off spending you are managing goals.

YMR Reader: The buy and hold strategy has been around for decades. Do you feel that same strategy applies to the Gen X and Y generation?

Deena: I do not believe that modern portfolio theory is dead.  I further believe that you can’t  make market returns unless you are in the market.  Look what has happened in the last two weeks— If you missed one day, you missed a 6 ½ % run up.  Right now, I have no reason to change my investment philosophy.

YMR: Speaking of generations, do you think the baby boomer generation is prepared for retirement? Why or why not?

Deena: Baby Boomers are not prepared, but they don’t really want to retire either. Further, if all of us did retire, we would not have a big enough work force to carry on.  Boomers may not stay with their current jobs, but may work at something they love, for less money.  They will postpone retirement because they have to, even though they will not admit that’s the reason.

YMR Reader: Asset allocation has been preached extensively after the dot.com bubble, yet even diversified balanced portfolios took a significant hit with the recent economic meltdown. How do you address that to those concerned?

Deena: See #6 above.

YMR Reader: Speaking of asset allocation, what do you recommend people do with their retirement accounts? I would like an answer for new hires, mid-range employees and close to retirement employees.

Deena: First, the younger you are, the more time you have to let your portfolio grow.  I suggest a low-cost S&P 500 index.  Leave it alone.  As you continue to add money, eventually you should buy small cap and international-all index.  Mid range employees, you may want to add some fixed income, probably around 20% max.  As you get closer to retirement, you may have 60% equities, depending upon when you will need to start withdrawing from them. You want low-cost selections, because the fund expenses come right off the return.

YMR Reader: The economy has my wife feeling a bit insecure even though we’ve got a sizable emergency fund built up, and we have no debt. The question is, once we’ve completed our emergency fund, what path should we take? Should we start investing in the stock market like it’s on clearance, save in a high yield savings account, or should we be paying extra on our mortgage? Or a combination of those things?

Deena: Some leverage is good, so I would not start paying down the mortgage unless your interest rate is so high that you cannot beat it by investing your money elsewhere.  If your mortgage interest is low, invest in the market, because it is on sale.  I would suggest that you in invest index mutual funds because they are cheaper (less expenses).  Try Vanguard’s S&P Index fund for starters.

YMR Reader: My wife and I are in the market to buy a new home. We’ve saved up a sizable amount and we are selling our current co-op to use mostly as a down payment on a new place. Our credit is also impeccable. Still…how can we tell if we can truly afford it? Is there a metric/guide we can go by?

Deena: Bankrate.com has a calculator that can help you get your arms around that.  I don’t like “rules of thumb” because they are made for average situations and I believe you deserve solutions that are unique to you.

YMR: Now a fun question! How are you liking semi-retirement in Texas?

I am not semi-retired!  I am working 24/7, but loving it.  I love Lubbock, it’s just the right size community for me.  I love the school, my fellow faculty and most of the students.  I can’t imagine doing anything else. In fact, we’ve opened up a branch office of Evensky & Katz here in Lubbock and we are in for the long haul.

Many thanks to Deena for allowing me to interview her!

10 Ways to Go Green and Save More Than $500 Per Year

I typically get very random emails throughout the day. I really have no idea where they come from or how they got my email address. However, every once in a while one comes along that has some good blogging material in it. Today I received an email from Humana (a health insurance company) about 10 ways to go green and save more than $500 per year. Ironically, only one of the tips have anything to do with health insurance. In order to save you some clicking, I will list the 10 ways here.

1. Clean Up Your Indoor Air

This is another health savings tip, because indoor air pollution can affect you physically. Learn about where that pollution comes from and how to treat it, including mold, natural gas, and pesticides that you can track into the house.

2. Change Heating and Cooling Filters When You Pay Your Electric Bill

It may sound pretty extreme, but if you have it makes sense. It also saves money – your heating and air units will act more efficiently, and you can save more money by buying filters in bulk. Changing your furnace filters on a monthly basis can save as much as 5 percent on your heating bills – as much as $100 a year.

Our apartment complex automatically changes our filter every 3 months or so. I have seen the old one after a change and believe me, you might want to change yours too!

3. Switch the Light Off

Many people use light during the day. Many times, it’s needed. But instead of leaving the light on when you’re not in the room, just switch it off. Even better, use a energy-saving bulbs: for every five you change, you can save an average of $27 a year. Common sense can go a long way and pay off over time.

We are working on changing all of our light bulbs to compact florescent. We are kind of bad about switching off lights though!

4. Drive More Efficiently

Take simple and safe precautions . Make sure your tires are inflated properly. Take off your roof rack to cut down on drag. Boost mileage by getting regular tune-ups . Try walking or biking for short trips to help the environment – and yourself.

I have always been very cautious about the way I drive. That means I use my brakes infrequently and start slow. It’s hard to keep up with these habits in Maryland with all of the bad drivers! One way to make sure you drive better is join a program like Progressive’s MyRate. It tracks your driving in order to help reduce your rates (or increase them if you drive bad). It keeps me in line in the car knowing that it’s there!

5. Reuse What You Can

Get reusable water bottles instead of buying bottled water: if you consumed the suggested daily amount of water – eight 8-ounce glasses – the cost would be 5 cents per day. The annual cost would be only $18.25. With the cost of a 12-ounce bottle of water at $1, the daily cost would be $5.33 and the annual cost would total $1945.45. While this number is extreme, it’s easy to spend more than $500 annually on bottled drinks including water, juice, tea, and soda.

This is a hard one for me to break. I am completely addicted to soda and I buy a 20oz bottle every few days. I know it’s bad for me and the environment but I just cannot break the habit! Anyone have some tips?

6. Wash Clothes Only When You Have a Full Load

Two socks or a full load require the same amount of energy to wash. ‘Youll save money on your water bill when you wash clothes less often. Front-loading washers also can save you money: anywhere between $28 and $137 annually. To be safe, we’ll say you save $50.

I have talked about this before in my post on saving money and energy on your laundry.

7. Use Cold Water Whenever Possible

Home laundering can account for as much as 36 percent of your total household hot water use. You can save 90 percent of the energy you use to wash clothes when you switch to a cold wash. A switch to a cold-water detergent may cost a little more per load, but it evens out with larger loads. Also, reduce your water heater temperature to 120° F. It makes no sense to cool water that’s too hot to use. To put in perspective, washing your clothes in hot instead of cold for a year, uses more electricity than leaving the refrigerator door open for a year.

Personally, we wash all of our laundry in cold water expect for whites where we use warm water.

8. Bundle Up

In cold conditions, evaporation can quickly suck away warmth, especially if you’ve been active and then are stationary, leaving your skin exposed. Make sure to wrap yourself in insulating layers. Wear dark colors to absorb outside light and heat energy.

9. Strip Down

Heat-loss through evaporation is needed to regulate your body temperature in hot weather. Wear more clothes in fabrics like cotton and linen that allow your body to release evaporation. Wear white or light colors to reflect light and heat energy.

10. Camp Out Inside

You can dramatically decrease heating costs when you turn down your thermostat at night in the winter. Some people even turn off the thermostat, because they’ve learned how to sleep with several blankets and wear a cap. Even if you don’t go to those extremes, you can save $45 a year by adjusting your thermostat two degrees down in the winter and two degrees up during the summer.

We turn our heat down about 10 degrees each night. When my fiancee gets up in the morning, she turns up the heat. It’s an easy habit to learn and it will save you a bunch of money.

Are You Living ‘Within Your Means’ or ‘Below Your Means’?

Recently, there was an article on CNNMoney that tried to define the phrases ‘living within your means’ and ‘living below your means’. I think they are two phrases that are completely different and here are my ‘definitions’ of them.

Living Within Your Means

To me, this phrase is too positive. Living within your means sounds like you are spending everything that you earn. That sounds more like living paycheck to paycheck. Which one sounds more positive to you? If I told someone I was living within my means, they would think that I am getting by just fine. However, since I am spending everything that I earn in order to pay the bills, mortgage, debt, etc., I am in no way saving any money. They wouldn’t think to ask if I am saving money because the phrase kind of implies that I am saving when I am not. However, living within your means also implies that you are taking on no additional debt. Since I am only buying things that I can afford based on my income, I would not be buying things that I cannot pay with cash.

If I told you that I am living paycheck to paycheck, you would probably feel bad for me. Living paycheck to paycheck is more negative and it definately applies that I am saving no money. I am here to tell you that these phrases are the same thing and there is no difference.

Living Below Your Means

When someone says that they are living below their means, I automatically think of clipping coupons and driving a 1993 Nissan Sentra. I don’t know why, but that is just what I picture. However, I feel that living below your means simply means that you are able to sustain your standard of living by spending less than you earn. You may be completely comfortable with the way you live your life financially. You just do not spend all of your income meaning you can save. You can save up for retirement, a car, a house, etc. Living below your means is they way to become The Millionaire Next Door. Living below your means will also help you get Beyond Paycheck to Paycheck.

What are your definitions of these phrases? Are they radically different than mine? Which category do you feel you fit in?

Weekly Roundup – February 15th

Well, Valentine’s day has passed. What did you and your significant other do? Did you do something frugal? Did you go all out? Did you spend your stimulus money already? We decided to do the responsible thing and not spend much money on each other. However, tonight we are attending one of the best seafood restaurants in the area. We feel that it is OK to spend some money every once and awhile or else we would just go insane. Anyway, I hope you had a great Valentine’s and please enjoy the holiday on Monday! Unfortunately, I have to work. 🙁

Here are some great reads I found this week. Please be sure to check them out!

David at My Two Dollars shows us Do It Yourself Debt Reduction. Some great tips here if you are thinking you are at your last wit. Before you do anything crazy, check out this post.

NCN at No Credit Needed shows us 10 Places to Look When Scrounging for Change. The story the precedes the tips is the best part of this post. I think it’s great that he ended up doing what he did!

The David at Pimp Your Finances lets you know Why He is Starting a Vacation Fund in the Middle of a Recession. Sometimes the best way to save money is by telling yourself that you are going to do something fun with the money.

Have a great week!