Milking the Dollar$

Once again, I have come across an article in Women’s Day by Mary Hunt that I feel is worth sharing.  In “10 Ways to Use Credit Cards Wisely,” Ms. Hunt details what she believes are the best ways to manage credit cards.  Not only does she give her tips, but each suggestion comes with an “action plan” on how to best follow her advice.

Although I believe she has some good ideas, I don’t agree with everything Ms. Hunt has to say.  From reading it, it appears Ms. Hunt’s is coming from the suggestion that the reader has problems managing his or her credit.  I (on the other hand) feel like those that read my blog are already financially savvy enough that they don’t need babysitting.  Thus, I have added my own suggestions on how to get the most from whatever is in your wallet.

Mary Hunt’s 10 ways to use credit cards wisely

1.  Micromanage your account:  I probably go overboard on this!  However, it is important to register your account online and check it ever so often.  Issuers have been making a lot of changes recently, and it’s best to stay on top of your current agreement with them to avoid any fees.

2.  Keep your balances low:  If you are using almost all your limit every month, you are hurting your credit score.  The author suggests never using more than 30% of your available credit limit.  If this is impossible, it would probably be a good idea to request a limit increase.

3.  Watch when you pay:  This is one of your credit card company’s dirty tricks – changing closing and due dates without warning.  My solution to this has always been to schedule a payment for the complete balance on the the day my statements normally close.  By doing this, I never forget to make a payment and can notice early on if they have changed the due dates.

4.  Think twice before transferring:  I have never done a transfer, so I can’t really comment on this.  The author, however, notes that you will likely pay a fee of 3-4% on the  balance, as well as lower your credit score.

5.  Request a limit increase: This is a good idea if you are constantly charging up to your credit limit, because otherwise you will start lowering your credit score.

6.  Don’t apply for credit cards you don’t need:  This is good advice, because at a certain point, the number of credit lines will start to hurt your credit score.  Also, although it wasn’t mentioned the article, it is important to note that most issuers do a “hard pull” of your credit history during the application process.  Unfortunately, this will also lower your credit score.

7.  Keep accounts open:  The author makes the point that once an account is open, the damage has already been done.  Thus, she suggests keeping them open to prevent your credit score from being lowered.

I have done this myself on a store card I never use.  I wish I had never opened it to begin with, as I will never use it again; however, I don’t want to close it now, because I will lose that credit history.  Therefore, my solution was to cut it up, but keep the account number and contact information just in case I someday need it.

8.  Keep accounts active:  This is really important in this day and age.  As the author mentions, a closed account is never a good thing.  I would also add that you are likely to get your limit cut if you don’t make some occasional purchases with any given card.

9.  Lower your rate:  The author suggests calling your card’s customer service to request a lower rate.  She argues that if you are paying over the average rate (14.3%), you need to request that they lower it.

I don’t agree with Ms. Hunt on this point.  In fact, since I suggest you always pay your balance in full every month, it’s always best to focus on getting the most lucrative rewards programs available instead.  Personally, I have no idea what the percentage is on any of my cards, and frankly, I don’t care, because I don’t pay interest!

10.  Get the right rewards card:  Unfortunately, there is not a lot of choice today, as major card issuers are cutting back on their rewards programs.  However, I suggest you choose more than one, so that you can maxmize your rewards in every situation.  For example, I carry a Chase Freedom for everyday situations, a Discover Open Roads for when I purchase gas, and an Amazon Visa for purchasing books.  These 3 allow me to get between 1-5% cashback on every purchase I make.  Remember, it’s all about those nickels and dimes!

My credit card advice

Unlike many of my fellow Americans, I absolutely love credit cards!  They are invaluable tools if used with caution.  In my years, I have noticed that the people that hate them are usually the ones who have abused them and then subsequently refused to take responsibility for their actions.

In my mind, I like to think of a credit card as “the ring” from Lord of Rings.  It’s powers are immense, yet it corrupts the weak-willed.  With this in mind, here are some tips to help you better wield your card’s power:

1.  Never spend more than you can pay off at the end of the month!  To me, this is a no-brainer, but some people just can’t seem to control themselves.  Credit cards offer some of the worst type of loans you can get, so don’t use them as such!  Instead, consider them interest-free monthly “floats” which allow you to keep your cash in high-interest accounts while borrowing theirs. 

2.  Focus on the rewards program offered and ignore the interest rate:  If you follow the above advice, there is no reason to ever worry about the interest rate.  Instead, select the cards which will provide you the most rewards and start racking them up!

3.  Put every purchase you can on plastic:  After I have fulfilled my monthly rewards checking obligations, I put every purchase possible on my credit cards.  Not only does this allow me to earn hundreds of dollars every year, but it also affords me certain buyer protections that cash does not.

4.  Schedule a payment as soon as your statement posts:  I am a busy guy, so I tend to forget things.  Thus, I make it a habit to schedule a payment for the full amount on the day my statement closes.  This routine has kept me from paying interest and/or late fees due to forgetfullness.

5.  Schedule you payments in a way that allows 1 business day before the due date:  Scheduling my payments for the next to last minute allows me to get the most of the interest-free float provided by credit card companies.  However, I wrote “next to last” for a reason, as I like to leave 1 business day to correct any mistakes and to ensure sure my payment does not post on the next day.

6.  Carry more than one rewards card:  I mentioned this before, but it’s worth repeating.  The percentage on rewards cards usually varies depending upon what and where you are purchasing.  Thus, whether you are picking up clothing, gas, or groceries, you will always be prepared to get the most mileage out of your dollars.

Another week and yet another great round of posts by my partners!

Ben at Banker, Saver discussed how to develop a CD ladder.  This is a good strategy to keep part of your money liquid, as your CD’s mature at different times.  As always, Ben does a great job of explaining how a CD ladder works.  However, at the current rates CD’s are yielding, I suggest looking a putting your cash into a rewards checking account instead.

There was a post Thursday on Debt Loans about how to make credit card debt history.  The author put his own twist on what is practically a “tried and true” method.  I like how he reminds readers to keep reading financial blogs, because that is a great way to learn personal finance!

Olivia at Independent Beginnings made note that Student Bloggers was giving away an HP laptop!  The winner was announced on Saturday, and (like always) I didn’t win:(

My Life Finance posted a very interesting article titled “Swoopo: The Auction Scam.”  In case you aren’t familiar, Swoopo is kinda like eBay on crack cocaine.  From what I hear, the auctions are cutthroat and kinda confusing?  To learn more, read the original post because the author does a good job exposing it.

Wallet Wise featured a post on positive signs in the housing market.  This has been in the news a lot recently.  I personally feel that most markets are still way overpriced and further correction is needed.  However, never underestimate the ability of the real estate industry to re-inflate the bubble.

This marks my first attempt to review some of this week’s posts by my fellow bloggers.  Believe it or not, there are other wonderful sources of financial information on the web!  Enjoy!

Banker, Saver asked the question, “Are you FDIC Insured?”  Having worked in the financial field for several years, the author has found herself surprised by how little her customers knew about federal deposit insurance.  Remember, not all investments are covered by the FDIC. 

My Aussie friend at Debt Loans discussed the pros and cons of debt consolidation vs. bankruptcy.  Both are viable options for those buried in debts.  However, choosing the right option depends on the individual situation.

Olivia at Independent Beginnings finished the final installment in her in “Step-By-Step Guide to Financial Independence.”  To wrap up, she discussed the art of building wealth through wise investments.  If you have the time, you should read all 7 part, because she covers a lot of topics well.

My Life Finance gave an update on his CashCrate earnings.  It looks like he has been able to increase these substantially.  I have always been skeptic of this site and others like, but it appears some people are able to make a little cash on the side utilizing it.  Just remember to set up a separate email account if you want to try something like this because your inbox will be filled up quickly!

There seems to be a common misconception that only those with high-paying jobs can get rich.  It may be true that a  high income can get you to where you want to be financially much quicker.  However, that’s only because when you make more money, you have more potential to save.  The thing to remember (as I have stated before) is that income does not equal wealth, and even those of us with the most meager of means can retire comfortably.

The Millionaire Next Door (an essential read for those interested in personal finance) blew the whole notion of the rich “living large” clear out of the water.  In their research, the authors found that most millionaires did not live in McMansions and drive fancy cars.  In fact, they found that most were hard to recognize, as they usually lived in modest homes, held average jobs, and drove their vehicles till they died.  On the other hand, those in the high-income brackets with corresponding lifestyles had far less accumulated wealth as a factor of their incomes.  As one profiled rancher from the book put it, these people are “all hat, no cattle.”

However, all this talk about the poor getting rich probably doesn’t mean much to you without real-life examples.  Thus, I introduce you to Mr. Earl Crawley. 

Mr. Crawley’s story

Earl Crawley is a perfect example of a person who “gets it.”  Working as a parking attendant, he was able to accumulate a significant amount of wealth over his working life.

Crawley’s rags-to-riches story first began when he was young.  As a child, he was given the financial lessons that most of us where never fortunate enough to have received:

My mother taught me how to budget, which made me appreciate how a little money can grow.

Over the course of his career as a parking attendant, Mr. Crawley utilized many of the strategies commonly used by the poor to get rich.  His multifaceted approach, allowed for him close the income gap with his “better off” peers.  So how did he do it?

• He took advantage of what he was taught:  As I noted above, Crawley’s mother had the foresight to teach her son about money at an early age.  Quality financial education is often overlooked, but could possibly be the most important thing you teach your children.  Thus, teach them how to succeed financially now, and  they will thank you later. 
• He lived frugally:  You can cut back on almost everyone without too much pain.  Crawley, himself, lists simple living as his main overall strategy:

 I did it with good old-fashioned nickels and dimes.

• He generated multiple income streams and saved his earnings:  Crawley states that he maintained odd jobs from which he saved as much as he could.  I cannot recommend enough having a second income source dedicated to long-term savings.  In fact, 100% of the profits I generate from my various “side hustles” go straight to saving. 
• He invested wisely:  Although he didn’t have much formal education, Crawley was smart enough to ask experts about financial advice.  He remarks that he was never afraid to ask questions to the brokers, financial advisers, or even customers he came into contact with everyday.  The information he gleaned allowed him to make informative stock picks which paid off well.

By following these steps Earl Crawley’s hard work paid off in the tune of a $500,000 portfolio.  That’s right, a parking attendant earning minimum wage increased his net worth to a half million dollars!

Like any financially savvy individual, however, he hasn’t stopped yet.  In fact, he has started his own investment club and continues to research stocks. 

Overall,  it appears the sky is the limit for this saver!  Hopefully, his story made you realize that you too can become wealthy, no matter which career path you have chosen.

In this day and age, it’s hard for us to image anyone turning a blind eye to society and its financial system.  When we can conjure up this individual, the image is usually of some mentally-ill transient or survivalist/militia type.  No one “normal” could possible live this way, right?

Odd or not, Daniel Suelo is doing  just that.  That’s right, this white, middle-aged college graduate decided that one autumn day in 2000 he had had enough.  Fed up with money’s control of his life, Suelo headed for the outskirts out Moab, Utah 9 years ago and hasn’t turned back.  Instead of living in a house full of manufactured goods, he now calls a cave his home and dines on whatever he can scavenge.

Below I have included some excerpts from Suelo’s story.  Please take the time to read the full article about his life, because this guy’s existence is pretty amazing.  He kinda reminds me of a modern-day Chris McCandless.  Enjoy!

On why he left:

“When I lived with money, I was always lacking.”  “Money represents lack. Money represents things in the past (debt) and things in the future (credit), but money never represents what is present.”

About food:

He sautés the watercress, mustard leaves, and wild onions, mixing in fresh almonds he picked from a friend’s orchard and ghee made from Dumpster-dived butter, and we eat out of his soot-caked pans.

His former life:

HE WASN’T ALWAYS THIS WAY. SUELO graduated from the University of Colorado with a degree in anthropology, he thought about becoming a doctor, he held jobs, he had cash and a bank account. In 1987, after several years as an assistant lab technician in Colorado hospitals, he joined the Peace Corps and was posted to an Ecuadoran village high in the Andes.

What his future holds:

Suelo is 48, and he doesn’t exactly have a 401(k). “I’ll do what creatures have been doing for millions of years for retirement,” he says. “Why is it sad that I die in the canyon and not in the geriatric ward well-insured? I have great faith in the power of natural selection. And one day, I will be selected out.” Until then, think of him like the raven, cleaning up the carcasses the rest of us leave behind. 

I found an article at Yahoo Shine about 10 everyday things people commonly waste money on.  The article is short, so I recommend you click on the link to check it out.  However, below is the complete list:

1. Extended Warranties
2. Gym Fees
3. Fast-Food Runs
4. Cell Phones Apps and Ringtones
5. Fees (Late, Over Limit or Worse)
6. Landline Extras
7. Rental Car Insurance
8. Computer Software
9. Unlimited Texting
10. Bottled Water

Like I said, this is a pretty good list and if you are spending money on any of the 10, I recommend you reevaluate whether or not the expense is warranted.  If I had to guess, most of you would have a hard time justifying any of the above.

Although this list is pretty comprehensive, below I have included a few things that are not on it.  Some of these may be no-brainers to you, but hopefully some will make you think about your own situation.

• Morning Latte:  You see this one a lot on these types of lists, but it deserves being repeated.  That $3-$4 you spend every morning at Starbucks will likely cost you over $1000 every year.  Thus, I would advise purchasing a coffe maker and start brewing your morning fix at home.
• DVD Collections:  I find it odd people actually purchase DVDs, given that you can rent them for $1 at a kiosk or free from a library (see my article on cheap rentals).  At $15-$25 each you would have to watch one 15-25 times or more to make purchasing a better value.  Most of the people I know may watch a newly purchased DVD 1-2 times, lend it out to friends, and then add it to their collection, where it sits over the years collecting dust.
• Premium Movie Channels:  Personally, I believe paying for cable or satellite service is in itself a waste of money.  However, paying for premium channels on top of that is just sinful.  Again, movies can be rented for free or cheap.  If you spend enough time on your couch watching movies to make a premium movie package the better value, then you are wasting something more precious than money – your life!
• Books:  This is kinda like the DVD example above.  I know people with shelves and closets full of books that they had purchased.  This is ridiculous given that almost every community has a library where you can rent them for free.  Does anyone really read the same book enough times to warrant a purchase?  Only on a couple of occasions have I ever read the same book twice, let alone multiple times.
• Personal Trainer:  This one really bugs me.  Unless you are a professional athlete or bodybuilder, please stop wasting your money on these people.  Routines are readily available online and if you stay active and eat healthy (as you should), staying in shape won’t be a problem.  Many of the people I know that hire personal trainers seem to do so for motivational reasons.  If you are not motivated to improve your health, that is something to work on seperately and not pay someone $25/hour to do for you.
• Smoking:  Here’s one of the big ones.  Smoking 1 pack/day at $6 per pack equals $2190 annually that you’ve puffed away.  That’s not even considering the increased medical costs that both you and the American taxpayer will have to eventaully fork over when it starts to kill you (which it will). 

Today, I found a good article from SmartMoney.com featuring 10 secrets real estate brokers don’t like to tell their clients.  Having never purchased a home, I wasn’t really aware of a lot of these, but after a quick read through, I found they all make sense. 

Although home ownership is not my specialty, I am familar with how brokers work in areas other than real estate.  Having said that, I have always found it to be in my best interest to avoid them and their services altogether. 

Below is a summary of the 10 things real estate brokers don’t want you to know according to SmartMoney.com’s staff.  If you want to read the original article just click the link above.  Enjoy!

10 things real estate brokers don’t want you to know

1. Your open house serves their interests more than yours:  Although many brokers encourage open houses, the article sites a study that found their success rate to be a mere 2-4%.  To you and me, this figure might not justify the effort needed to hold one.  However, for the broker, your loss is his or her gain, as the exposure to potential new clients makes up for a weekend of work.
2. Fees are negotiable: One can negotiate lower fees, although a broker would not tell you that.  Remember, with the housing market in rough shape, the ball is in your court.
3. You have more offers than you think: Although brokers are legally obligated to report all the offers they receive, some may chose not to tell you, because the offer you chose to accept affects their final fee. 
4. There is no obligation to be tight lipped:  If you make an offer for one price but hint that you’ll pay thousands more, the broker will likely pass that information on to the seller.
5. Loyalty is not a sure thing: Remember, brokers work for a commission.  That means their main interest might not be getting you a fair price, because the higher for them, the better.
6. Being a broker does not make one a zoning expert:  I have seen this a few times at the law office where I work.  Brokers will tell you anything to get you to purchase a property.  However, some of those modifications they pre-approve, might not follow local zoning regulations, which can lead to big headaches down the road.
7. Problems are sometimes kept secret: Do not use anyone on the list of home inspectors provided by your broker.  Often times, they are in “cahoots” with these individuals.
8. Brokers are not lawyers: According to the broker/lawyer interviewed for the article, brokers often “draft language that can have consequences without really understanding it, but they want to keep the sale going.”
9. Websites can be deceiving: Most people employee the internet when they are searching for a home.  However, some brokers list homes on their site that have long been sold to bait potential clients.
10. You can do without their services: This was my favorite on the list because it is so true for all brokers.  No matter what they are selling, brokers tend to “play up” the difficulty in buying and selling, so that the majority of Americans will utilize their services.  Thus, whether your dealing in stocks or homes, do some research and skip the broker altogether.  Do you really want to trust your finances with someone known as a “broker?”

I saw this article about millionaire traits at Yahoo Finance and thought I would pass it on.  I especially like the second one because I believe inaction is the reason why many Americans never achieve financial success. 

As Snoop Dogg himself once said, “dream big, you may never wake up!”