Credit Card Incentives: Should you sign up?

I was prompted to write this article by my dear old young, mom, I’ll call her Mama Ninja. She thought it would be valuable to explain the benefits and risks associated credit card incentives. I have blogged about credit cards a few times before, here, and here. But never really hit on the point Mama Ninja raised: “Is using a credit card with incentives a good idea?”

For those that don’t know much about credit cards, certain banks offer incentives with their cards to customers who purchase from merchants who accept credit card payments online, ultimately hoping it brings in more business for them. Some of the most typical offers are: 1%-3% cash back on all purchases or one frequent flier mile administered for each dollar spent.  If you’re still a little confused…you’re dumb….just kidding (kind of). Basically, if you charge $10K to your card over the course of one year and you have a credit card that offers 1% rebates on all purchases, the credit card company will credit your account with $100 by the end of the year. If you have a credit card and it doesn’t have incentives you might want to consider tracking a good offer down and signing up, after all, it is free money.

So why would the credit card companies want to give money back to you? The answer is simple. Most people with a credit card carry a balance from month to month and that makes the banks filthy stinkin’ rich. *Side Note: If you have credit card debt, pay that ‘ish off ASAP, sell a kidney if you have to, because the interest rate on credit cards is ridiculous.* They offer incentives to entice new customers, with the hope that they will not pay off their balance each month. Think about it like this, if you carry a balance on your credit card, they win. If you pay your balance in full each month you win.

So why did I recommend you sign up for using an incentives card? I would only make that recommendation if you have a proven track record (6 months or greater) of paying off your full balances EVERY SINGLE MONTH or if you posses crazy amounts of discipline. If you can’t do that, don’t sign up for any more credit cards!

I personally have a card that rewards me one frequent flier mile for each dollar I spend. I have had the card for two years and have always paid the full balance before the end of the billing cycle. I pay $75 each year to Bank of America to hold their Alaska Airlines Credit Card. I would almost always recommend that you only use credit card incentives if there are no strings attached…like an annual fee.

Why do I deviate from my own advice? Although I pay $75 each year for the card, I not only receive the miles on each purchase I make, but I also receive one $50 companion ticket each year. The companion ticket just means if someone I know flies Alaska Airlines to any destination I can get a ticket with them for just $50. I used it a couple months ago when I flew to Seattle with a friend and paid $50 for the ticket, when it would have cost me $225 if I purchased the ticket solo. So for me, the cost of being a member $75 is worth it to get a $50 dollar flight. I basically paid a total of $125 for my plane ticket ($75 annual fee plus $50 ticket fee). I could get a variety of different credit cards that offered similar mileage plans, but none can compete with the companion ticket offered through Alaska. The incentives offered with my credit card are perfect for my situation. If your preferences differ, consider going with a cash back card, but at the end of the day, never forget…Credit card companies wouldn’t offer these incentives if they thought you were going to pay your balance on time. 

If you do chose to sign up for an incentives card it is imperative you pay the full balance every month, on time. Now that I have bestowed wisdom upon you (actually you probably knew all of this) go forth and do great things.

…and in case you are wondering, I drew the plane up top…pretty good right?

Get rid of that darn storage unit

I was helping my girlfriend move stuff from her place in to a storage unit tonight and couldn’t help but think “Whoever started the storage business is a genius.” When it comes down to it, you pay someone to put junk in a closet for an often undefined length of time. I see the benefit of putting things in storage if you are going to be leaving for a summer or other short trips, but it’s pretty ridiculous to think some people pay for storage units just to hold on to stuff they don’t use.

My girlfriend’s storage unit is 3ft x 10ft and will cost $50 a month. She and two other friends will have their stuff in storage for three months. By the end of summer they will have each paid $50. That’s a reasonable price to store essentials like matresses, bed frames, dressers, etc for the summer, in my opinion. What really threw me for a loop was my girlfriend’s neighbor. As her and I were loading stuff up the neighbor approached us and began making small talk. We were talking about what a drag the moving process is and how we were taking her belongings to a storage unit. He then showed us his garage, which was full of boxes, and told us he had just gotten his stuff out of a storage unit….after four years of leaving it there. Is it just me or does that seem crazy!? This dude had a TON of stuff, way more than my girlfriend. Im guessing he was probably paying around $80 a month for his unit. Do you know what that works out to for those 4 years…$3,840!!! Homeboy was droppin’ bills to store what he called “junk.”

Why the heck would anyone pay almost $4,000 for things they clearly don’t need? I should go back and tell that guy I’ll charge him $50 a month to store his crap in my garage…haha. While at the storage unit I can honestly say that I didn’t see one door that didn’t have a lock on it, meaning they were all taken. I’m willing to bet a large chunk of those units are occupied by people that are storing stuff they haven’t used in a loooooong time.

If you have had a storage unit for longer than six months, it’s time for you to have a garage/craigslist sale. You will not only be saving yourself $50-$80 a month in storage fees, but you’ll also make a pretty penny selling all your old unwanted stuff. Make a committment to yourself and your wallet, to get rid of your unwanted stuff within two months. Then you can call me on Friday and yell “I’m Junk Free!!!!!” (a little Dave Ramsey joke for ya). Seriously though, paying $4,000 to hold on to junk is straight up wacko…agreed?

Ummm, I need to eat lunch…can someone help me?

I’m gonna stray away from a finance post today and hopefully solicit some dialogue with you PF’ers. As I have mentioned in previous articles, I work part of my day at home and the the other part doing Special Agent things outside of my house. I am coming up on two years in my position and I still haven’t figured out a good lunch time option for me. Since I each day I am working at a different location, I don’t have the luxury of keeping my meal in the fridge. I go most days holding off on lunch until I arrive back to my house, sometime between 2 and 4 each day. I know that is terrible for my body, so I have tried experimenting with some mini-meals that could hold me over until I can get home to eat an actual meal. Sometimes I bring trail mix or other snacks to fight the hunger pangs, but I’m starting to get sick of it. I know I should be eating a healthy complete lunch each day around noon, but I just haven’t figured out how to accomplish that.

* gross confession: I went to Jack in the Box twice last week because I can get two chicken sandwiches for $2 and feel full…Gross? Yes, but more filling than trail mix and apples *

So here’s my problem…I refuse to eat at sit-down restaurants for lunch (I’m way to frugal for that ‘ish), but I definitely don’t want to find myself in the Jack in the Box anytime soon. I tried thinking about food that could be kept at room temperature, or warmer since I live in San Diego and my car gets pretty hot while it’s sitting in the sun, that would not only provide variety in my meal, but also taste good. PBJ, trail mix, an apple, are all great, but I’m looking for some variety.

I bet you PF Bloggers have some crazy cheap but crazy delicious lunch time meals that you whip up. If so, please share them with me. If you’re reading this, drop me a comment and tell me what you are going to eat for lunch today and how much you think it costs. I would love to compile that database and add it to my, currently pathetic, repertoire of lunch time meal options. If you got suggestions for me, remember I don’t have access to a refrigerator or microwave so S.O.L for anything requiring those.

In honor of the lunch hour, I think you should watch the peanut butter and jelly video found here .

Four unconventional ways to make money…

I’m feeling a little spicy today so I thought I would give ya a little PF satire. I hope you enjoy it…

I have been doing a lot of thinking lately about different ways I can make some extra income. I’m not in desperate need for additional cash flow, but am always trying to figure out how to acquire more sources of income. I came up with some gems and thought I would share them with you all. Without further ado, four unconventional ways to bring in the green.

1) Start a Ponzi scheme, but don’t get caught. Wikipedia defines a Ponzi Scheme as a fraudulent investment operation that pays returns to investors from their own money or money paid by subsequent investors rather than from any actual profit earned. If you missed the news in recent months Bernie Madoff ran one of the largest Ponzi Schemes ever. Homeboy made $65 billion by swindling people. If you ever find yourself $50 billion short of that dream house or vacation, starting a Ponzi Scheme my be right up your alley

2) Get in your backyard and start digging. You never know what could be burried back there. Maybe pirates planted treasure in your yard and it’s just waiting to be found. Maybe there is a dead body, that would be weird. Or maybe your development is sitting on top of an oil reservoir, if so you could sell oil on your street corner next to the little girl selling lemonade.

3) Dress up like someone of the opposite sex and then become famous. I wish I would have known throwing on a bra and a pair of panties and acting like a charasmatic black lady would make me rich. RuPaul, as creepy as he/she/it is, turned a free time hobby in to a cash cow.

4) Bioengineer yourself eight babies and then call yourself The Octomom. Seriously who would have thought a human baby mill would go from rags to riches…literally. Mrs. Octomom went from the unemployed life, living with her parents, to getting million dollar offers to be in adult movies (which she declined) and as of April 16th has signed a deal with a UK TV company for a reality TV show deal. Anyone want to birth my 12 children? You can be called The Dodecamom!

So what are you waiting for? I just provided you with four great ways to earn millions. I guarantee you won’t find financial tips like this on another PF blog. Anyone else have any unconventional ways to make money? If so drop me a comment ’cause I would love to hear what you creative folks can come up with.

*This article was written purely for entertainment purposes. Don’t actually attempt to make money using any of these strategies. Why? Because #1 is illegal, #2 is a waste of time, #3 is creepy, and #4 is just plain disturbing.*

Dude, where’s my negative net worth?

I’ll tell you where it is… gone and hopefully never coming back! I finally made it in to the positive net worth territory. HECK YEAH! I’m officially worth more than I owe…754 dollars more to be exact. It feels so good to know that I could die tomorrow and my parents would be left with a small fortune (I know real small) after my debts were paid off. Hopefully that doesn’t happen anytime soon though 🙂 So here it is the beautiful graph where the red dot finally crossed the threshold and made it in to the positive territory.

*click the image to make larger*
I think I’ll celebrate this momentous occasion by not spending any money and running around in circles screaming “I’m worth something!” Maybe I should set a goal of never letting that red dot find itself in negative territory again? I know that may be optimistic, but I think it’s possible as long as I play my cards right. I have been tracking my budgets and expenses for quite a while now, but following my net worth is a relatively new world , and I gotta say I love it.

I haven’t really considered the idea of establishing net worth goals for my future either, but am beginning to think that might not be such a bad idea. Do any of you track your value on a regular basis? Do you make assumptions and predictions to what you’ll be worth 1, 2, and 5 years down the road? Do you even know what your net worth is? Or better yet do you like penguins named Philip? (just wanted to make sure you’re still paying attention)

Oh and if you are wondering why there is such a large jump in my worth from 04/08 to 05/08, it was because that was the month I figured out how to include my 401K investments in to Quicken.

I got a dollar, I got a dollar, I got a dollar hey, hey, hey, hey.

I’m dumb for consolidating my student loan

One of the worst days of my life occurred two years ago this month. I was in my senior year of college and life was good, that was, until I got a piece of paper in the mail that rocked my world. It was a tiny white envelope from my school’s financial aid office. It said I had a mandatory student loan exit interview to attend prior to graduating.

No big deal right? Wrong! I sat down for my exit interview and was given a piece of paper  summarizing my student loan balance. This was the first time I saw the damage in it’s entirety, sitting there laughing in my face. It was a dark day in my life. I was a month away from graduating, had no employment lined up, and was told it was time I started making payments on my over $28,000 balance. I felt like I wanted to throw up. Needless to say, I knew I needed to get my priorities in order and figure out exactly how I was going to tackle the intimidating $330 monthly payment.

I did a little research and discovered the world of student loan consolidation. Everything I read (probably from bank websites and Sallie Mae) preached about how amazing it was (let’s just say I didn’t know about PF blogs back then). I saw that it would lower my monthly obligation and lock in my interest rate. Turns out locking in my interest rate was stupid. I locked in at 7% and am kicking myself in the pants. Interest rates dropped the next year to 6% and are now at 5.6%. Even worse, they are scheduled to continue dropping through 2011 to 3.4%.

Shoot me in the face. I would have gladly paid a variable interest rate for four years and then locked in at the 3.4% interest rate in 2011. I ran the numbers and assuming I made minimum payments for 20 years, I would have saved exactly 10 buttloads of money by not consolidating my loans for the first four years and then securing the lower interest rate. 

I have learned that consolidating is not always the best option, especially when you are consolidating at one of the highest interest rates in recent history. Luckily I only plan to be making payments for another two years , so overall it wont affect me too much.

F you Sallie Mae for tricking me into a 7% interest rate, you win this round.

My Expenses: March 2009

That’s right peeps, it’s time to see where this kid spent his money for the month of March. I got to say it was one heck of a month and I’m completely stoked. Ending the month with a positive cash flow is always a good thing, but I exceeded my goals so I’m exstatic! So here it is, where my money went in March… 
(click the picture to make it bigger)

Explanation of Income:

Gift: This is money that I wasn’t expecting to get that fell my way. This month no one gave me money 🙁 What’s up fellow bloggers you didn’t want to send me a random $50 check in the mail for being awesome? Haha.

Interest Inc: Any interest that I may collect from investment/savings accounts. I finally broke the $10K threshold to get that whopping APR increase to 1.65%. It basically doubled my online savings account interest. I’m bringing home an extra 15 big ones each month now…that’s 15 double cheeseburgers at McDonalds 🙂

Salary: My take home pay from the day job. I get paid every two weeks, so twice a year I get an extra paycheck for the month. May and October is when this joyuous occasion takes place this year. This amount is also after my 8% contribution to my 401k plan. 

Tax Refund: This was my state refund. I thought for a minute The Govenator was going to keep my money for quite a bit longer with all the hype of the California tax I.O.U.

Tutoring: Something I do in my free time to make a little extra cash flow . Brought in a solid $934 this month which is good because April is going to me a terrible tutoring month, my little kiddies will have spring break.

Explanation of Expenses:

Auto: Any maintenance and fuel costs associated with my car or motorcycle. This category excludes vehicle insurance. Loving the motorcycle and work vehicle, ’cause I only had to pony up $25 this month for gas!

Cash: Any cash withdrawals from an ATM. This was spending money I allotted myself when I took a weekend trip to Seattle.

Charity: $100 to Klove radio (a christian radio station). I didn’t give anywhere else this month, terrible.

Dining: The dollar bills I be droppin’ when I take my lady on a sweet date (or when I’m alone and craving a tasty burrito). $37 this month is a solid number for me, probably one of the lowest dining months I’ve had.

Gifts: Any money I spend on someone else. No one was lucky enough to blessed by me this month. Maybe that’s why I didn’t receive any gift money either…karma anyone?

Groceries: Any food that I buy from a grocery store. My goal is to keep my dining and grocery expenses at about $250 each month. Ugh, $214 at the grocery store makes me feel like a little fatty.

Insurance: Includes car, motorcycle, and renters insurance.

Interest expense: This is my school loan . I have a monthly obligation of $178, but as mentioned in my other posts, I pay about double that each month. I decided at the end of March that I needed to throw at least $1K at Sallie Mae each month . This will be the last time you see a payment less than that. It wont be long till I kick Sallie Mae to the curb. Booya!

Reimbursement: Anyone owe me money? Yup, $160 for internet reimbursement and $34 for groceries I bought for a friend cause they didn’t have their card on them.

The overall total at the bottom is the cash I had leftover after all my expenses. This goes straight in to my online savings account and, either stays there, or gets put in my Roth IRA.

March was a phenomenal month and I stayed in line with my budget. I love quicken ’cause it keeps me in check with minimal effort on my part. I don’t want to be arrogant, but I feel pretty darn good about being 23 years old having a discretionary income of over 2,000 dollars! I’m doing what I can to be a good little saver and to one day live the dream and own a home. Kinda weird to think you don’t know what I look like, but you know how much money I spend. Does that make you creepy? Or me?