Imagine if there were a way to increase your chances of living your life in a way that makes you feel more fulfilled, more aligned with who you are and what your values are, and more at ease about your future. Imagine you had the ability to teach this way of life to your children so they grow up with these same principles that they can pass on to their children and their children's children. Sounds great, right?Read More
Finding Fulfillment Through Finance and Family
One of the most terrifying things I have ever read.
Becoming a CFP®, or CERTIFIED FINANCIAL PLANNER(tm), has been the biggest challenge I have managed to push myself through. Countless hours of studying. Well over $5,000 for the educational requirement which included seven classes and two review classes as well as $600 to sit for the exam.Read More
Finance is a complicated subject. It can, and has, made my head spin at times.
Building wealth, on the other hand, is very straightforward. No messy formulas to memorize or tricky equations to solve. Some may overcomplicate what it takes to build wealth by combining financial success with other topics such as investments or tax which can be complex.
Financial health is no different than other areas of our health. You do not need to fully understand cholesterol, body mass index, or high intensity interval training to know that if you eat junk food day after day and never exercise you will be unhealthy.
You do not need to fully understand income taxes, investment performance, or estate planning to become wealthy. Prosperity is achieved by spending less money than you make. Period.
Not just for one day or for one month, but putting the effort in to spend less than you make over and over again - this is what builds wealth. Wealth to allow you to extend your current lifestyle after you no longer have a paycheck. Wealth to perhaps help your children pay for a portion of college. Wealth to start a new hobby someday without financial worry.
Sure, investing, planning, and proper tax strategies can help magnify financial success, but only if you have spending under control or have ways to bring in more income.
I wish saving money was more complicated than this so I would have something to point to other than my behavior when I am falling short with my financial goals.
Building wealth requires resources, but it also includes sacrifice, understanding our attitudes and tendencies regarding financial matters, our sense of entitlement and personal expectations, even our history with money and personal stories play a part. None of us enjoy feeling pain or discomfort and making financial changes in our lives can sometimes involve some of these uncomfortable feelings.
Building wealth is simple. Look around though. It may be easy to understand, but it is hard to implement, practice, and maintain. If building wealth was a simple equation of spending less than we earn, most of us would do the math and be on our way.
I have enjoyed sugary foods most of my life. Breaking this habit is much harder than I ever imagined. It is now a day to day effort for me to eat healthy. I try to stay mindful of nutrition because ultimately a healthy lifestyle brings me happiness. The life I want for myself and my family is slowly becoming more important to me than my hunger for sugar in the moment.
I am human though and I am not expecting perfection. Sometimes, sugar wins. It's ok. I have built that into my plan. No shame. No should be...
I just eat some chocolate and try my best to fully enjoy it.
Why should our financial health be any different? Perfection should not be expected in our journey toward building wealth. We need to be honest with ourselves. We can assess our limitations, develop a plan, and have discipline. For some of us, this means disciplined health plans with some wiggle room.
(photo by SalFalko)
"Life is difficult."
In the book, The Road Less Traveled by M.Scott Peck, he goes on to say,
"Once we truly know that life is difficult - once we truly understand and accept it - then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters."
I have been giving some thought recently to what makes some of us happy, peaceful, glass-is-half-full kind of people while others of us are discontent, bitter, and woe is me kind of folks.
Think about the last time you had a financial mishap. Your washing machine croaked, your retirement portfolio tanked, or your monthly budget was blown. What was your reaction?
If you were not expecting these things to happen, you were probably upset or scared. We all get caught up in our own lives and how we think things should go. When something doesn't go as planned it can really shake us up, especially when money is involved.
Our expectations have a lot of impact on our happiness and financial peace-of-mind. Expectations have the ability to set us up for disappointment, or conversely, leave us better prepared when they are aligned with the reality of this imperfect world.
When we are not happy or something unexpected and unpleasant happens, we essentially have two choices; change the situation to make it more aligned with our expectations, or lower our expectations. Since most situations and circumstances are beyond our immediate control, this leaves the happiness seekers with no choice but to lower expectations in order to feel happiness and peace-of-mind.
If we are homeowners, we know our roof will need to be replaced at some point. It is not a matter of if we will need to replace many items in our home, it's a matter of when. Similarly, when we own a car we should expect it to bring some amount of headache and pressure on our wallets.
If you are looking to gain more peace when it comes to your finances, you need to expect the unexpected. Prepare for these inevitabilities. Save for them. We may not know what is coming or when, but we know something is coming our way. Let's plan for that.
There will be times when our investments are not performing well. Unexpected expenses will come our way. Our friends and family are going to let us down. Our children will make mistakes. Plans are going to go off course. This is the nature of imperfect beings living in an imperfect world. None of us will get through this life without disappointments.
Life may be difficult, but it suddenly becomes less difficult when we stop chasing perfection and the idea that we deserve more than we are getting.
Do you feel that happiness is related to our expectations? How do you think this plays out in your financial life?
(photo by Tax Credits on Flickr)
This guest post was written by Alanna Ritchie, a personal finance writer for Debt.org, a financial help website.
Managing Your Personal Debt
While money doesn’t buy happiness, it can send you careening full-speed into debt. Before long, bills start to pile up, the hole becomes deeper and you wonder how you are ever going to get your feet back on the ground.
Millions of Americans are suffering from what’s not in their wallets and how to pay the bills. It’s no wonder the stress seems downright unbearable:
The mounting pressure to get out of debt directly affects how we feel and it doesn’t discriminate. While there comes a time to honestly face the issues, the stress from the circumstances of financial difficulty often weighs heavily on us, causing us to put off searching for a solution. When you think about it, your next step is choosing how to eliminate your debt by developing a plan of action. Then as you dig out of the money pit, you may instantly notice some of those obstacles begin to fade away.
The Upsides of Debt Settlement
One of the best options for the young and cash-strapped is to settle the debt. Typical settlements can erase between 25 percent and 50 percent of the outstanding balance owed. This is rapidly becoming a popular solution for consumers with overwhelming financial hardships.
Debt Management: Overcoming the Attitude Obstacle
Awareness is the first step in changing your future. Before you become financially free, you’ll need to realistically address the debt-inducing habits you’ve acquired. Create a new thought process that keeps you on track and think twice before committing to monetary transactions.
Denial and an unstructured comfort zone can keep you stuck in a rut and dissatisfied with your money situation. Many people put off taking action to get out of various financial dilemmas. We think about our problems and constantly worry about them every day. However, most of the time, nothing positive or constructive gets accomplished.
There are no quick fixes, and we all wish there were, but if you stand a chance of realizing real financial freedom, you will need to cut expenses and start living well below your means. You do not need to take a vow of poverty, but living below your means requires unyielding restraint.
Remember that while you can get out of debt, it will take time. Keep pressing on even if there are hiccups here and there, and stay focused on the end goal, a debt-free future.
Alanna Ritchie is a content writer for Debt.org, where she writes about personal finance and little smart ways to spend (and save) money. Alanna has an English degree from Rollins College.
Did you know you have an estate? Yes, You. I also have an estate.
Although the official definition is more wordy, there is an easy way to explain what your estate is:
All of your STUFF.
We all have stuff that sooner or later will need to be distributed. The state in which you live will get to decide the distribution for you through the probate process if you do not have basic estate planning documents in place when this time comes.
Estate planning is not something reserved for only the super rich. It is for anyone who cares how their property, money, or minor children and dependents are cared for should they become unable. Estate planning is a series of legal documents put in place to ensure your stuff is handled the way you would like after you pass on or can no longer make decisions for yourself.
If something were to happen to you tomorrow, what would happen to your financial obligations and accounts? If youare incapacitated and lying in the hospital, your mortgage still needs to be paid. Who would pay your bills, collect on insurance and other benefits, and watch over your children? What happens to your personal belongings? All of these items can leave your loved ones with a lot of heartache.
In order to avoid some of this heartache, here are a few of the basic estate planning documents and their purpose:
Power of Attorney
A power of attorney is a document in which one person empowers another to act on his or her behalf. This allows the holder of the power to tend to your financial or legal affairs should you become incapacitated or incompetent. Have you set up a POA with your spouse?
Health Care Proxy/Durable Power of Attorney for Health Care
A healthcare proxy or durable power of attorney for health care is similar to a power of attorney in that it appoints a person to make decisions on behalf of another. It differs from a power of attorney in that it concerns medical decisions only.
Living Will/Advance medical directives
A living will is a legal document which expresses your wishes regarding life-sustaining issues should they arise. This document, when given to your physician, gives him or her medical treatment instructions they must follow.
A will is another legal document that is drafted while you are alive. Your will handles the transfer of your property through the probate process in a court. This document lets the courts know how you would like your property and accounts to be distributed. It is also for designating who you would like to be guardian for your minor children or other dependents and who will manage your assets for their care and benefit.
It is important to note that property can also transfer by operation of law and avoid the court process. This is done by owning property jointly and designating beneficiaries on accounts. You should rethink your beneficiary choices anytime you have a significant life change such as the birth of a child, divorce, or death in the family.
A qualified estate attorney can work with you to draft these basic documents. Having these estate planning documents in place can bring you peace of mind knowing your affairs are in order should anything happen.
(Photo by Ken_Mayer on Flickr)
Children have a lot of wants.
My children enjoy toys, gum, clothes, books, ebooks, songs downloaded from iTunes, markers, dry erase boards with dry erase markers, flourescent highlighters, flip flops, sports jerseys, stuffed animals, and ice cream to name a few.
Like a lot of parents, my hubby and I have a desire to teach our children to appreciate the value of a dollar, be independent and responsible, grasp money management, respect their belongings, and understand how things run in the real world.
We know it is possible to teach children about responsibility and the value of cooperation by assigning chores and providing opportunities for them to contribute to the family. We also know it makes sense for children to have hands on experience to best learn about counting, spending, saving, and sharing money. Does it make sense to link these goals together? Whether or not to pay children for doing chores is one of the most hotly debated parenting topics out there today.
Most financial experts agree that children should be given an allowance to learn basic skills of money management. Children will generally take more time with their money decisions when their own money is on the line. It's not as easy to learn money skills when the money is coming from Mom or Dad and seemingly unlimited.
However, handing out an allowance may leave some parents feeling as though they are teaching entitlement to their children. On the flip side, only paying your children if they do something around the house does not teach anything about cooperation and may cause other family issues once kids are old enough to earn money by other means.
What to do? What to do?
Like a lot of things in life, I don't think this topic is as black and white as it may seem. Creating a plan somewhere in the gray has been something that works for our family. We accomplish many family goals by implementing various chores and jobs into our daily family life.
We call our daily chores family chores and they are actions that need to be taken just for living in a house and being part of a family. Most of these tasks are centered around personal hygiene and picking up after oneself. It's what keeps life and home running smoothly. This list includes tasks such as brushing teeth, cleaning bedrooms, taking a bath or shower, as well as unloading and reloading the dishwasher each day. We try to be clear on what each child is expected to accomplish from this list each day. Privileges remain, are added on, or are taken away based on these tasks.
Money Paying Jobs
There are different tasks around the house, such as washing windows or cleaning the garage, that can be done in exchange for pay with the pay increasing as the difficulty of the chore increases. This allows all of our children, ages 9, 7, and 3 to get in on the action. They can choose the quicker job for $1 or earn more money by working harder and choosing the $4 chore. We have a chalkboard listing all of the chores and associated pay so we can update accordingly as the kids get older.
This method does require some resilience since there are many weeks we do not make it past the Family Chores. For that reason, I would not say this is the best method out there for teaching money management skills. It is also challenging to remain firm when one of the kiddos would like to buy something fun and they have not yet earned the money to buy the item. It's not easy, but I do believe this better prepares them all for the real world. Pay for work. No work, no pay. It sounds hard core, but it feels good when we are going to the grocery store and my 9 year old grabs some of her own money to get herself a treat.
Our children have received cash gifts on various occasions and we have used those opportunities as they got older to talk about how much to spend, save, and donate by using our money banks. A lot of retail piggy banks serve this purpose now, but you could also make your own, similar to this. Another great resource for parents is DoughMain for teaching your family about money and keeping track of chores. Something I have not yet tried but looks pretty cool is Moneytrail to help parents track allowance payments.
There are families who pay their children for positive behavior, exercise, or homework completion. Some families pay for good grades, some don't. Some use other non-monetary types of rewards such as television or computer time. The key is to find what works best for your family and try to stick with it.
Has your family tested out allowance payments or chores for money? Do you have a system that works for your family or one that has flopped? I would love to hear about it. Please feel free to leave me a comment below.
(photo by Jeremy Kunz on Flickr)
Sometimes we know our financial situation isn't great but we don't want to admit to ourselves how bad things really are. Perhaps we are burying our heads in the sand in avoidance or pushing it off for sometime in the future. Bankrate.com recently published an article about how to tell how close you are to financial ruin. Read ahead if you dare, or cover your eyes and hum a tune for the next few minutes while I list the 8 signs you're close to the edge of financial disaster.
Paying bills late. If you find yourself paying bills late each month or not paying them in full you could be headed for trouble. By not paying a bill in full you are incurring more debt the following month including a late fee. Once you are in this cycle it is hard to break, especially if you are living paycheck to paycheck. If you are incurring late fees because you are simply not keeping track of when bills are due then maybe you should consider automating some of your expenses. Most banks now offer online bill pay including paying bills automatically for you or texting you a reminder that a bill is coming due.
Counting on a future windfall. Making any financial choice today with the expectation or hope of a financial payoff in the future is never a good idea. Rationalizing a purchase today thinking you will pay it off later with a bonus, tax refund, inheritance, or equity from your home could put you in financial ruin if the purchase was large enough and your windfall did not materialize.
Fighting with your spouse over money. Regularly fighting over large amounts of debt could indicate that one or both of you are living outside your means. Your family's spending may exceed disposible income. If spending cannot be controlled or you find yourself incurring more debt than you can pay off, you may want to look into credit counceling services to get you back on track.
Carrying multiple credit cards. It is not bad to have a few credit cards, but you should be concerned if you are only paying the minimum each month on one or more of your cards or you notice your balances creeping up. This is a hard battle to win once you begin. If you fail to make at least the minimum payment for 60 days your cardholder could increase your rate making your situation even worse.
Regularly paying overdraft fees to your bank. If you are frequently overdrawing your checking account you could be close to the edge of a financial disaster. Declaring bankruptcy may be a possibility if you do not have income to cover your debts.
Having a savings rate of zero. Like other expenses, your savings account should be paid each month. We all have an unexpected expense coming up in our future and not setting aside money to pay for it is setting yourself up for a problem. Some folks think they will use their credit card in these situations. The problem there is that banks can lower credit limits at anytime and having a financial difficulty is not the time you want your credit limit lowered.
Using retirement savings to cover expenses. Regularly tapping in to your retirement savings is an indicator that you are not handling cash flow very well. You could be sacrificing your retirement funds and future.
Using home equity for wants. Withdrawing equity from your home for things like vacation or other material goods could be a sign of financial distress. A home equity loan may make sense for a financial hardship, but not if you are using it as a financial crutch.
Don't wait until it's too late to realize you are heading toward a financial disaster. Finding ways to change your behavior today is easier than digging out of a financial hole tomorrow after blindly falling off the edge.
(photo by Su-lin on Flickr)
Did you know you have something in common with both Donald Trump and President Obama? Well, if you are the CFO (Chief Family Officer) of your family's finances you certainly do. Whether it's a family's cash flow, a business's bottom line, or the surplus or deficit for our country, money makes the world go round (or at least gets your bills paid). Money in and money out, it's really that simple.
Having a grasp of how much money is coming in is pretty straightforward, but what about how much moola is going out each month? Believe it or not, it doesn't matter how much you are bringing in. What matters most to your bottom line or net worth is how much of your money you are holding onto. If you don't believe this, think about how many professional athletes or celebrities file for bankruptcy. Donald Trump falls into that catagory. What about that couple in your neighborhood who just retired early and are leaving for another trip? Didn't they make a modest income? Making a lot of money does not necessarily make you wealthy. Making the right choices with your money is what can potentially make you wealthy.
All wealthy people have one thing in common. They spend less than they earn. It's simple but it's not easy. Especially given the standard nowadays when living outside your means has become the norm. Everyone is doing it: buying more, charging more, getting more. Here are some questions to ask yourself while considering if you are moving in the right direction:
Are you thinking about the consequences of what you are buying or just spending frivilously?
Do you want more? Do you need more?
Are you comfortable with your consumption?
Are you socializing with like minded people who will encourage your spending decisions?
Take time to think about these questions. It is the decisions you make today that will make the difference in how your future looks and feels. It's up to you. And your bottom line will thank you.
(Photo by Gage Skidmore on Flickr)
As a child, I did not have everything I wanted, but I had everything I needed.
I never paid much attention to money.
I absolutely took money for granted.
I was a kid and full of joy.
It's easy to take something for granted when you are not aware of its presence. I was never aware of money. There was no need. I never knew when Mum or Dad paid a bill or made a donation to a charity. I was never taught about money management and I never bothered to learn the rules.
Some folks had money and some folks had less and I assumed this was due to earning capabilities. If you had a good job you probably had a nice home and a lot of money in the bank. Having never learned anything on the contrary, I thought it was pretty simple. Someday, I too would earn money from my "high paying job" and everything would be fine. Money and I were friends. Or at least I thought we would be friends one day ~ probably good friends.
If I could earn a good salary I could do whatever I wanted and this loyal friend would always be there. So, I did what I thought I needed to do. I went to college, got a job, even went to graduate school. I studied finance and still wanted to believe that if I earned enough money I would not have to be careful with my spending. Work hard and play hard. I assumed my money would always comfort me, support me and take care of me in times of need.
You know what they say about making assumptions. Turns out earning enough money was never the problem for me. Having enough money was.
I knew I needed to manage my money long before I started incorporating any sort of budget into my daily life. You can only hide behind the money excuses you have made for yourself for so long. I did not track how/where/when I spent any money. I felt betrayed when I realized money management was unavoidable. That was not the life I had envisioned for myself. I didn't want to be frugal, stay home while missing fun events, or take any time looking for special sale prices on things. Sure, I had a little somethin' going toward retirement, but my real savings would have to come later. For now, I wanted to make money and spend it. Was that too much to ask? Hadn't I earned that after all of these years? If I made enough money, couldn't I slack off in the budgeting department?
The answer is No.
Money is not here to take care of us. Money does not care what your yearly salary is. Money does not care how hard you work or what you feel you deserve. Money is not your friend. Your lifestyle will consistently adjust along with your income until you commit yourself to mindful and intentional spending. Trust me. I was the poster child who grew up to be the poster adult for mindless money management.
Money is a tool to help you take care of yourself. It may not come with directions, but like most tools, you must use money with caution and allocate wisely or you will likely get burned.
(photo by Hobbies on a Budget on Flickr)
I wish my dad were a car mechanic.
Call me a skeptic, but there is a lot going on under that hood and I always wonder if I am being told the whole truth. Perhaps it's not a lie but a misrepresentation told by a talented salesman who needs to make a living. Maybe the alternator does need to be replaced, but don't sell me on a brand new top-of-the-line model when a refurbished one will work just fine. Don't push a rebuilt alternator when a new one is needed. Please just give me what I need. Nothing more, nothing less. Until I find a trustworthy mechanic I will always wonder:
Is there an incentive to put his needs ahead of mine?
Similarly, there are also money managers out there with incentives in place to maximize profits for their firm (and themselves). They do this by recommending products that are suitable for their client while also being the BEST choice for them personally based on commissions. These firms and advisors are not legally obligated to help clients find the BEST products and investments for their personal situation. While not illegal, there is clearly a conflict of interest in these types of firms.
Fortunately, there is an easy way to avoid this struggle and find a "trusted mechanic" to manage investments and offer sound financial advice you can trust. There are financial advisors out there who recommend products that are the BEST for the client because these products are directly aligned with the client's goals and personal situation. The advisor gets paid the same whether the client chooses the rebuilt "alternator" or the top of the line. There is no conflict of interest. There is no incentive plan in place to push a client in a particular direction.
In the world of money management, trusted mechanic = fiduciary. A fiduciary is "one who acts in utmost good faith, in a manner he or she reasonably believes to be in the best interest of the client" (CFP board). A fiduciary will not look for products that are simply good enough for your situation, but rather will always be working to a higher standard of finding you the BEST products for your circumstances and risk tolerance at all times.
For more information, check out NAPFA.org This is the website of the National Association of Personal Financial Advisors. There is a guide provided on their site to use as a resource for finding a financial advisor who will work in your best interests. Is your advisor on the list?
Photo by Jonesemyr on Flickr
You want to get your finances under control. Perhaps you are tired of worrying about your money. Maybe you are starting to think more about your goals and are wondering if you will ever get there.
Where do you start? What steps can you take to get your financial plan in place and make sure it stays on track?
There is a little legwork up front in this process, quite simila r to organizing a room in your home. When re-organizing, it may take you several hours to clean out the space, throw away the junk, think about how you want it organized, buy some new bins, folders, labels etc. and set the space back up with this new and improved layout. It's a lot of work but you do it because you know when it's done it actually saves you time in your life. For some of us crazies, this process and new efficiency sparks a deep feeling of H-a-p-p-i-n-e-s-s as well.
Here are some steps you can take to get you started with money management:
1. Write down your goals
You first need to know where you want to go before you get directions on how to get there. Spend some time thinking about exactly what it is you would like to do with your money. What are your short-term and long-term goals? Decide which of these goals are high priority and what is not as important and then list these goals in order of priority.
2. Create a cash flow spreadsheet
I hate the word budget. Just hearing the word makes me think of pain and anguish. I don't know about you, but I certainly do not want to spend any time doing something that will bring me misery and take away my freedom. Therefore, I fondly refer to this process as cash flow management. YOU are managing your cash flow. You are in CONTROL. Perhaps you like to buy organic food, or read a lot of books, or your children do activities, or you give generously to charity. Whatever it is, someone should be able to look at your cash flow spreadsheet and get an idea of what is important to you.
In order to create your cash flow spreadsheet, you will need to spend a month or two tracking your income and expenses to get an idea of where your money is going. Have your spouse do the same. You can do this by looking at your receipts, bank statements and checkbook or by using free online money management software such as Mint or My Spending Plan . These sights are secure, but if you are not comfortable linking your bank accounts to one of the sites you could try BudgetTracker. Tracking your transactions like this will allow you to have a realistic starting point for your cash flow spreadsheet. You may also want to set up a payment schedule to make sure your bills are paid on time and nothing is missed in a given month.
Looking for an example of a cash flow spreadsheet or payment schedule? Click here: Family Money Manager Cash Flow Statement and Family Money Manager Monthly Scheduled Bills.
3. Track your progress year to year
The best way to track your financial progress year to year is by calculating your net worth. Your net worth is everything you own (assets) minus everything you owe (liabilities) and can serve as a financial report card. Your net worth should increase year to year and you can accomplish that by either increasing your assets or lowering your liabilities. Seeing your net worth go up by even a little can be the boost you need to stay on track and stick to your budget. If your net worth is not increasing or if it's getting lower, it's time to sit down and trim the fat. Look at your cash flow spreadsheet again and identify areas you can cut back or earn more.
Need a way of tracking your net worth? Click Family Money Manager Net Worth Statement
The key to this whole process is you won't have to spend much time thinking about your finances once you have an efficient system set up for tracking and monitoring your money. Afterall, for most of us the joy comes from knowing that we have things under control, not the time spent and tedious work of keeping it under control.
(photo by Craig Bennett on Flickr)
I specifically remember spelling memorized lists of words for spelling tests in elementary school. I can remember learning how to sew in junior high school. I also recall learning some basic computer skills as well as typing 34 words per minute in high school. What I do not remember anyone mentioning was balancing a checkbook, taxes, credit cards or credit scores. Why?
Despite some great financial literacy programs out there like
the statistics are grim:
"Only fifty-nine percent of the young adults in Generation Y (ages eighteen to thirty) pay their bills on time every month." (2008 Financial Literacy Survey National Foundation for Credit Counseling, Inc. and MSN Money)
"...many Americans lack a basic understanding of rudimentary financial concepts, principles and practices. Not only did this widespread lack of knowledge contribute to massive consumer overleveraging, among other practices, it contributed to the Great Recession" (Harnish, 2010).
One does not have to look far to see the overspending, undersaving, excessive borrowing, and lack of preparation for college or retirement. Why are otherwise good, healthy people making such poor decisions with their money? Is it the lack of financial education? There is talk of some colleges now making finance a required course. Will this make a difference?
(Photo by LifeSupercharger on Flickr)
The recent rise in gas prices has me doing something I am not particularly proud of: shopping around for a credit card offering cash back on gasoline purchases.
The last time I felt this panicked over gas prices was back in the summer of 2008 when gas prices shot above $4 per gallon and a lot of people were using Gas Buddyto find the lowest prices to fill their tank. I ended up doing an analysis at that time of how much gas my husband was using driving his 2006 Toyota Tacoma 89.32 miles round trip to work 5 days a week and how much money we might be able to save long term if he switched to a more fuel efficient car. This is also when I started dubbing the Toyota Prius my arch nemisis with it's fancy shmancy 50MPG. We never ended up making a change at that time because gas prices started dropping a few months later and by November were at a 5 year low of $1.72 per gallon.
2012 and here we are again…
Don’t get me wrong about buying gas with a credit card. We have used an Exxon Mobil credit card for years now to track our gas usage and watch price trends and it has worked great for us. I am not opposed to responsible credit card usage. Using credit cards and paying them off each month does build good credit, but I’ve never particularly liked being locked in to buying my gas at Exxon Mobil. Exxon Mobil gas prices are some of the highest around and we are not being rewarded in any way for being die hard Mobil users. I called them to ask about any rewards they may offer loyal cardholders like us and the conversation went something like this... Me: "Do you offer any type of rewards to your customers?" Customer representative: "Let me look....Um, no." I tried to push to speak to a manager but realized I was not going to get anywhere when I was shot down again.
I think it is time for us to move on.
There are a few different types of credit card rewards programs out there:
Points rewards cards
Cash back cards
Travel rewards cards
The cards that offer points rewards will give you a point for each dollar in purchases charged to the card to be used to “shop” at their online store for merchandise. You can also use these points to purchase gift cards to participating stores. Cash back cards offer cash back bonuses of a certain percentage of your purchases at certain stores. For instance, a credit card offering rewards on gas purchases may give you 3% cash back on your qualifying gas purchases and 1% cash back on everything else you charge using their card. If you travel often, a travel rewards card will give you travel, airline and hotel rewards to be used toward your future travel. Check here for more information on some of the more popular rewards cards.
Some of the credit cards offer 2% cash back on gas purchases and some offered 3%. Since this card will be used only for gas purchases and our gas consumption bill is as much as some folk's rent each month, I wanted the highest cash back reward I could find. The highest I could find was a whopping 5% cash back and I think this is now being offered by a few different banks.We ended up going with the VISA Platinum Cash back rewards card offered by the Pentagon Federal Credit Union (PenFed).
Whatever type of credit card you choose, you need to shop around for the best terms. A lot of banks will mostly market the cards that pay them the highest commissions. I think a good place to start is your existing bank, credit union, investment firm, or brokerage house, for any existing deals they may have to offer you as a customer.
(Photo by Paulo Ordoveza on Flickr)
Bank of America announced this week they will NOT start charging $5 per month to debit card users as they were scheduled to do. This change of heart was due to outrage by some politicians, consumer groups, and customers (including me!) To better understand why BOA would ever think the additional $5 fee would be a good idea, let's take a look at what's been going on in the banking industry...
The Dodd–Frank Wall Street Reform and Consumer Protection Act. Signed into law in July 2010 to promote financial stability in the U.S. by improving transparency in the financial system. The "Durbin Amendment" is a provision in the bill that regulates debit card interchange fees (also called swipe fees). Prior to this amendment, debit card companies such as BOA were charging stores an average (swipe fee) of 44 cents per transaction. The amendment capped interchange debit card fees for merchants at 21 cents per transaction.
This is a big financial hit for banks like Bank of America. Many in the banking industry warned that customers would see higher fees following the Dodd-Frank Durbin Amendment. They were right. While a lot of the big banks are stating they will not be charging customers debit card fees, there are fees showing up for not maintaining minimum balances of $5,000 and not having direct deposit set up. We will probably start seeing our large banks promoting and enticing us to use our credit cards instead.
So what can we as consumers do? Here are just a few ideas:
Go old school. Start carrying cash to pay for items instead of using your debit card or credit card. More retailers will not be accepting debit cards for smaller purchases due to provisions in the Durbin bill which allow them to do so. Not only will carrying cash save you some hasstle and save on debit card fees, studies have shown that we spend more money when we swipe vs. pay in cash.
Maintain minimum account balance to get free checking. If you do not typically leave a substantial cushion in your checking account, consider transferring funds from savings to cover the minimum balance requirement in your checking account. This will save you from paying a debit card fee each month and the sitting balance can be used as a layer in your emergency funding should an emergency arise.
Switch to a smaller community bank or credit union. This new law affecting debit card fees applies to banks with over $10 billion in assets so going to one of the smaller banks may provide more of what you are looking for in a bank.
It seems the world of banking is undergoing a big change due to goverment intervention. While I was happy to hear that I will not have to start paying a monthly fee to have convenient access to my own hard earned money, it appears this is just being put on hold for a few months while BOA and other big banks figure out a more tactical way to make up their lost revenue from the new federal regulation.
(picture by w. fox on flickr)