My Personal Finance Journey

All posts by Jacob A Irwin

Using Prior Planning to Prevent Poor Performance

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following article is by MPFJ staff writer, Miss T, from Prairie Eco-Thrifter. If you want to learn how to live your dream life in a sustainable, healthy, and money savvy way, check out her site here.

“Prior planning prevents poor performance,” was a line my sales manager used to quote to me frequently when I first started work.

It occurred to me recently that this little saying applies to many areas of life, including personal finances. You need to plan to get where you want to be financially, otherwise, you probably won’t end up where you wanted to be. I can tell you that my financial position improved considerably once I actually started planning how I wanted to spend my hard-earned cash.

Visualize Where You Want to End Up

Before you can set out a plan, you need to know where you want to end up. What position do you want to be in later in life? Do you have a 5 year, 10 year, and 20 year plan? What position do you want to be in when you retire? For that matter, when do you want to retire?

Having a financial plan also helps you manage your money better and actually helps you make it stretch to achieve all the things you want in life. Financial planning helps you know where your money goes and how to keep money in your pocket or account for longer. You know what you want your money to do for you because you have taken the time to work it out in advance. Prior planning means that you avoid unnecessary and reckless spending on things you don’t really need. (Haven’t we all done that at some time?) You will know how much you can spend at any time and what your credit limits are. Never again run out of money before you get to the end of the month.

Steps to Financial Planning

These are some of the reasons why financial planning is a good idea. So let’s look at how you go about it.

The first step is to work out what you want, what is important to you and what you want your financial future to look like. Investigate your personal values – those beliefs that you have about what is right and good. Most people make their decisions based on what they value. Sit down with your partner and determine your mutual values and how your differences could impact your financial future. This step alone will help to avoid many of the arguments couples have over money in the future.

If you find it hard to work out your values and beliefs, consider some aspects of life like savings, education, family, vacations, health, success, debts, entertainment, insurances, food, clothes, culture, sports, hobbies and activities, friends, spending, money and any other things you think of. Rate each point on a scale of ‘important’, ‘not important’, ‘very important’ and ask your partner to do the same. Compare your lists and discuss the areas in which you differ; consider how your differences will impact your financial future.

The second step in planning your financial future is to draw up a budget. Make a list of all the household income and expenses, leaving nothing out. Remember to include occasional expenditure like gifts, hair cuts, vet bills, and magazine subscriptions. Subtract your total expenses from your total incomes; if you get a negative figure, you will need to find where you can cut spending. Try to make several smaller spending cuts rather than just one big hit; this lessens the pain somewhat.

Does your budget include amounts for some general savings, an emergency fund, and retirement saving? These are vital areas to make allowance for in the budget to get your financial plan set on solid footing and enable you to manage unforeseen disasters. You might need to make some tough decisions to set yourself up for a more favorable financial future.

If you have amassed a large credit card debt, like I had, allow extra funds for attacking this expensive debt to get it paid off. This should be your first financial goal; this high-interest debt will impact your financial security for as long as you have it. It will be easier to make the tough choices now than wait until later, when your situation could be more serious.

Once you have your budget in place, you will have a good idea where you stand financially, right now. If your income is insufficient for you current spending needs, consider a better paying job or a second part time job. If your situation is really serious, consider such things as down-sizing your home or buying a less-expensive car.

When you know where you are at the moment, think about where you want to be at different stages of your life. Set goals such as where you will live, what vehicles you’ll drive and holidays you want to have. What do you want your retirement to look like? Work out what these will cost you and factor them into your financial and savings plans.

Your financial plan will always be a work-in-progress. As your achieve goals or your circumstances change, tweak your plan to keep it relevant to your needs.

 How about you all? How do you financially plan?

 Share your experiences by commenting below!

    ***Photo courtesy of http://www.flickr.com/photos/76657755@N04/7027601297/sizes/l/in/photostream/

    How to Stick to Your Debt Payoff Goals in the New Year

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    Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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    The following is a post by MPFJ staff writer, Jeff. Jeff blogs about finances, health and the environment over at Sustainable Life Blog.

    It’s December, and for many of us, that means holidays, friends, family and fun. These are some of my favorite parts of the holiday season, and I’ve been enjoying them for years.

    About 4 years ago however, I started to look forward to something else in December. Back when I was at the beginning of my personal finances journey, every year I’d tell myself that I wanted to get my finances in better shape in January, and every year, 12 months later, I was either in the same spot or worse off. It happens to everyone, and that’s OK. I wasn’t really serious then, but when I finally got serious, I did a lot of research on how to actually achieve my goals.

    Here’s what I learned:

    1. Figure out where your journey starts.

    I never knew how much debt I had, and I could not predict my income very accurately every month because I worked two part time jobs, and the amount of work I did depended on my free time, which depended on my school schedule.

    Essentially, I was missing two crucial pieces of my budgeting process: the amount I was making every month, and the amount I was spending. In addition to that, I often had no idea exactly how far in the hole I was. When I wast starting to make changes, I wrote down the balances on my two credit cards, as well as other monthly expenses like rent and food. I subtracted those from my monthly income (which stabilized in grad school) and for the first time, I had an accurate picture of what my finances were doing every month. Armed with this list, I could then start thinking about my goals. 

If you’re serious about getting your finances turned around in 2013, start by determining your monthly income and expenses. You’ve got until the end of the month to gather all your bills and your paychecks.

    2. Pick your most hated debt. 

    For me, this was easy. I hated my credit cards for multiple reasons. They represented me paying for an irresponsible, previous version of me that didn’t want to wait and save up for anything, and couldn’t say no. Obviously, I didn’t like acknowledging these traits about myself, so it made me angry. In addition to that, the amount of interest that I paid for this irresponsibility made me angry as well. It was clear to see for me what my most hated debt was. 

Since I hated my credit card debt so much, it was easy for me to pick the first target. In addition to me hating it the most, it was also the highest interest rate debt, so it made lots of mathematical sense and would free up a lot of cash flow when they were paid off.


    3. Create a realistic plan.

    For years, this tripped me up. When I had a $3500 balance on my credit card at the end of every year, I always wanted to pay off the whole thing come the next year. Of course, it wouldn’t have been impossible, but at the time I was making about $6,600 per year. It wouldn’t have been easy, and given my income, I would have had to spend almost half of my earned income for the year just to credit cards!

    Obviously, this wasn’t all that realistic. 

Instead, I settled down with a two part plan. The first part was the simple part: Don’t use the card anymore and raise the balance. Once the balance stopped going up (and started going down slowly), I was able to put the other part of my plan into action. Part two was to pay an extra $100 above the minimum payment to one of my cards until it was paid off. After I got paid every month, I paid my credit cards and sent an extra $100 to one of the cards. Once that started to happen, the balances started dropping every month, instead of staying basically the same or going up like they normally had.


    4. See it through.

    There’s going to be a lot of hiccups on the way – those are to be expected. Sometimes, you may not be able to spend that extra $100 for the credit card every month. That doesn’t matter much, but what does matter is how you respond the next month. Keep plugging away and your balances will go down, even if you miss an extra payment one month. If something happens in March and that just knocks you off track, you just lost out on an almost $1,000 reduction from your extra payments at the end of the year! You’ll hit bumps in the road for sure, but how you respond to them is what will ensure your success.

    While it took some time for me to finally pay off my credit cards, it was totally worth it. Nothing good will happen over night, and if you want it, you’ve got to keep working at it.

    How about you all? What tips do you have for paying off some debt and making your new years resolutions stick in 2013?

      ***Photo courtesy of http://www.flickr.com/photos/birddogger/4930697767/sizes/l/in/photostream/

      Quit Buying Meat from the Supermarket: Buy Straight from the Farm

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      Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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      The following post is by MPFJ staff writer, Melissa Batai. Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans, where she shares her family’s journey to healthier living and paying down debt.

      Meat gets a bad rap.  Doctors warn that it is bad for our health, especially our cholesterol, and there are routinely stories of meat that causes widespread illness.  However, meat is also an excellent source of protein, and if you eat the right type of meat, it is not as damaging to your health.

      Animals that are fed corn based diets almost exclusively are generally sickly animals.  Their fat stores toxins, which we in turn eat.  Also, many large processors use antibiotics on these sickly animals, which we also ingest.  When these animals are processed, they are taken to a large factory, and a package of hamburger may be made up of several cow’s meat all mixed together.  No wonder there are occasional outbreaks of illness.  It is surprising human illness from consuming this meat doesn’t happen more often!

      You can take a stand against this kind of meat production and perhaps save money by buying meat directly from the farmer.  Our family hasn’t bought any meat from the grocery store for over three years, and we don’t have any plans to.  The meat that comes straight from the farmer is much tastier and healthier, in my opinion.

      If you would like to buy directly from the farmer, here is what you need to do:

      Find a Farmer Near You – CSAs

      If you don’t know of a farmer, finding a place to buy your meat is often most difficult.  However, there are some websites to assist you.  LocalHarvest.org is a great resource.  Type in your zip code, and you will get a list of the CSAs near you.  The majority of farms will list their produce CSAs first.  You will have to probe a bit deeper to see if the farm also offers a meat CSA.

      With a meat CSA, you will get a variety of types of meats, often once a month.  We subscribed to a meat CSA last year, and typically got cuts of beef, pork, and lamb in our monthly deliveries as well as whole chickens sometimes.

      Most of the animals that come from a CSA are not given antibiotics and are allowed to freely graze.  Still, calling the farmer to discuss how the animals are raised and how much grain they receive is a good idea.  Remember, the higher the quality of meat you consume, the healthier you will be.

      Grass Fed Animals

      If you want to find the highest quality meats that are high in healthy omega-3’s, you will likely want to consume entirely grass fed meat.  The site, eatwild.com, has a listing of farmers near your area that only feed their animals grass.  (In the winter, farmers often feed them grass that has been dried in the summer rather than feeding them grains.)

      Because this meat is considered the highest quality, it is great for your health, but it is not a frugal option.

      Buy Direct from the Farmer

      The most cost efficient option when buying meat is to buy direct from the farmer.  My cousin is an Angus cow farmer, and we buy 1/2 side of beef from him every year.  Our order 18 months ago gave us cuts like chuck roasts, T-bone steaks, Porterhouse steaks, sirloin steaks, and ground beef, to name a few.  We paid $514 for 117.5 pounds of meat, averaging $4.37 per pound.  Sure, that isn’t the best price for ground beef, but it is a good deal on the nicer cuts of meat.  Even more importantly, we know where our meat comes from, how it was raised, and how it was processed.  We know our ground beef only includes meat from one steer.

      If you would like to find a farmer, check with your friends who may buy a 1/2 side of beef, or look in the phone book.  Another option is to just Google “farmers selling beef in Nebraska” substituting your desired type of meat and state.

      Questions to Ask the Farmer

      Before you agree to buy any meat, you will want to ask some questions.   Some that may be important to you are as follows:

      -Are your animals given antibiotics or other medicines or chemicals?
      -Are they exclusively grass fed?
      -If they consume feed, what type?   Is the corn non-GMO?  Is the soy?  Are there any animal bi-products in the feed?
      -How are the animals processed?
      -Is there a discount for bulk purchases?  (Perhaps you could buy an entire cow for a discount and split the meat with some friends and relatives.)

      Concluding Thoughts

      Buying locally from a farmer can help your bottom line.  Even if you don’t find the meat to be cheaper than the meat in the grocery store, you will typically be eating higher quality meat.  While I skimp in lots of areas of my life, I don’t like to skimp on food.  Even though organic produce and meat is more expensive, I hope that I am saving on healthcare costs in the long run by taking care of my health and my family’s.

      How about you all? Have you ever bought direct from the farmer?  Would you consider doing so?

      Share your experiences by commenting below!

        ***Photo courtesy of http://www.flickr.com/photos/audreyjm529/1799343748/sizes/l/in/photostream/

        Are Debt Management Plans Worth the Cost?

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        Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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        The following post is by MPFJ staff writer Travis. Travis is a customer blogger for CareOne Debt Relief Services, and also appears weekly at Enemy of Debt. Travis candidly shares his personal journey to pay off $109,000 of credit card debt and the tips he’s learned along the way. As a father and husband, he provides a unique perspective on balancing debt, finances, and family.

        My story is simple:  My wife and I accumulated $109,000 in credit card debt.  But we’re on our way to paying it off.
        The first question I get asked is, “How in the world did you rack up that much debt?”
        The answer really boils down to the fact that we consistently overspent day after day, week after week, month after month for 13 years.
        From there, the story gets more complicated because the next question is, “How are you paying it off?”
        In July of 2009, my wife and I enrolled in a debt management program (DMP).  A DMP is a program in which a debt relief provider negotiates with each of your creditors a lowered interest rate and a monthly payment that results in the debt being paid in full within 3-5 years.  In return, your lines of credit are closed, eliminating your ability to rack up additional credit card debt. We make one monthly payment to our debt relief provider, including a monthly service fee, and they disperse the right funds to each creditor.
        In that description, the thing that people pick up on most is the fact that we pay a monthly service fee for our DMP.  Some don’t agree with paying a fee to an agency to help you get out of debt.  It feels like a scam to them.  This usually leads to some prodding with the intent of  convincing me that I overlooked a way I could have eliminated my debt without paying a monthly fee.  
        The Statement:  “You can call your creditors and ask them to lower your interest rate.”
        My Experience:  I called each of my creditors, and even after threatening that I would no longer be able to pay them each month if they didn’t help me, none of them agreed to lower my interest rates.
        The Statement: “I heard that credit card companies have hardship programs that will lower your interest rate and your monthly payments – and they are free.”
        My Experience:  While it is true that many credit card companies do in fact have such hardship programs, at the time I was investigating debt relief options in 2009, I did not know this and NONE of my creditors offered it to me.  Additionally, most of the hardship programs are only valid for a year.  Even if all 13 of my creditors would have agreed to put me in a one year hardship program, it would have been impossible to pay off $109K of debt in that length of time.  When my year ran out, I’d be seeking options once again.
        The Statement: “Debt management programs don’t do anything that you couldn’t do on your own.”  The suggestion implied here is to cut expenses, increase income, or both. Learn to live below your means and pay down your debt.  No service fee needed.
        My Experience:  This method certainly works. Except not everyone can do it on their own.  I compare it to someone that is desperately trying to get in shape and lose weight.  They try to do it on their own by promising to exercise regularly and eating healthy. For some, this works out perfectly, but some are met with failure because but it takes a level of discipline, motivation, and accountability that they just cannot find within themselves.  These people sometimes find success by enlisting the help of a personal trainer.  The trainer provides the structure needed to help the client achieve their goal.
        As far as getting my finances back on track, I’m one of those people that needed a personal trainer.

        My debt relief provider is my financial personal trainer.  Their progress tracking tools, and interacting with other customers in their online community provide me motivation.  The fact that my accounts are closed and I risk having my creditors rescind their agreement if I open new lines of credit, or miss a payment, provide discipline.  Even more importantly, my debt relief provider has resources available that have helped me learn how to track my expenses, budget, and for the first time in our marriage live within our means.

        How Much Did My DMP Reduce My Interest Rates?

        Our debt management program also has an important advantage over attempting to eliminate debt our own by way of the reduction of interest rates.  Prior to enrolling in the DMP,  the interest rates on my lines of credit ranged from 6% all the way up to 29.99%.  After enrolling in the DMP, my interest rates now range from 1% to 13%.

        How Much Does My DMP Cost?

        Had I continued just paying the minimum payments, it would have taken over 30 years to pay off my credit card debt, and I would have paid about $156,000 in interest.  With the program, my debt will be paid off in 60 months, paying $38,000 in interest.  For my $50 a month service fee ($3000 over the life of the program), my DMP will save me about $118,000, and years of debt repayment.
        If you’re in debt, it’s important to know that you have options.  A debt management program is just one of many choices available.  The best thing that someone struggling with debt can do is to fully educate themselves on all the options, including doing it on your own, debt settlement or even bankruptcy.  Knowledge will enable you to make an educated decision.  A debt management program isn’t the right choice for everyone.
        It was, however, the right choice for me.

        How about you all? Do you think Debt Management Programs/Plans are worth the cost? Have you ever participated in one yourself, or know anyone that has?

          ***Photo courtesy of photostock / FreeDigitalPhotos.net

          When Renting is Better than Owning a Home

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          Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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          The following is a post by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

          Owning a home is right there with baseball and mom’s apple pie as an American virtue. It’s seen as the centerpiece of middle-class life and as the foundation of financial success. But, there are times when renting is better than owning a home.

          What are some of those times?

          Establishing yourself early in life

          There’s often an emphasis on buying a house as early in life as possible. It’s similar to the imperative to begin funding your retirement plan, in that you begin paying down your mortgage so that it is fully paid off well before your retirement. In the meantime, the house should rise in value over time, providing you with a substantial asset in addition to shelter.

          There’s no doubt that that line of reasoning makes abundant sense. However, when you’re in your 20s and life holds so many variables, owning a house can be more of an albatross than an advantage. If you meet and marry someone from out of town, or you need to relocate to follow a job, the house could be a problem you don’t need.

          When you’re young and trying to establish yourself in life, it’s often best to do it with as little baggage as possible. A house is a big piece of baggage, and can get in the way of important plans.

          During financial hardship

          Though we often think of a home as a safe harbor, it can be quite the opposite during a financial hardship.
          For one thing, when you’re going through financial hardship, you’ll need cash. It’s not at all easy to get cash out of the house anymore. Cash from home equity lines are harder to get than they used to be. But, if you’re having financial troubles, you won’t be able to qualify anyway.

          You could also consider selling the house, but that presents its own set of problems. For one thing, there’s no way to know how long it will take to sell the house. For another, personal financial troubles often coincide with national economic problems. Selling a house in that environment isn’t always possible.

          Cash flow is another problem. Financial troubles usually require that you lower your living expenses. Largest of these typically is the house payment. If you rent, you can always find a cheaper place to live. If you own however, that won’t be so easy to do. In addition, as an owner, you will have repair and maintenance costs that will soak up more precious capital.

          Being a homeowner isn’t always the best state of affairs when you’re facing a financial crisis.

          When you have a career that involved frequent job changes

          Some people are in career fields that require frequent job changes. The typical situation may be a person who is on the management fast-track, and has to move frequently in order to follow promotions within the organization. Owning a home usually doesn’t help a person in the situation.

          Every time you have to move to make a job change, you’re faced with the choice of either selling your home or renting it out. The current housing market makes it very difficult to buy and sell a house every three or four years and to do it without losing money.

          If instead you decide to rent out your home, after 10 or 15 years you’ll have a portfolio of rental properties that are all over the country. Not only will that be very difficult to manage from an investment standpoint, but it might conflict your primary occupation.

          When you‘re making a big push for retirement or starting a new business

          This one is not true in all cases. Sometimes owning a home can be a significant part of both retirement planning or an effort to start a new business. In other times…it can sort of get in the way.

          How can that happen?

          Let’s say you’re starting a new business, and you need every dollar you have to cover either start up costs for your venture, or living expenses for the first few months. Your house would represent a fixed expense plus the variable costs of repair and maintenance. That would compete with your efforts start a business on a shoestring.

          The same could be true with retirement. If you are looking to load up on your retirement savings, especially if you are a little bit late in doing so, the cost of owning your home will compete with your efforts. It will be difficult to put extra money into your retirement plan when you need to replace the roof, the air conditioner, or the carpeting in your house.

          There is no way to know for certain if owning a home would or would not be a problem in any of the above situations. But at the same time, it’s not necessarily true that owning a home is the right course for everyone. Consider the choice to own or to rent based on your own personal circumstances, keeping in mind that owning may not necessarily be the right thing for you.

          How about you all? Do you think renting or buying makes more sense?

          Do you think your opinion of renting vs buying changes as the housing market conditions fluctuate?

           Share your experiences by commenting below!

            ***Photo courtesy of http://www.flickr.com/photos/29456235@N04/5396894948/

            Why Building Credit in Your Teens is Crucial in Your 20’s

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            Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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            The following is a guest post written by Jason Bushey. Enjoy! 
            Like most 20-somethings, I’ve learned my fair share of lessons the hard way while adjusting to the scary post-college existence that is the “Real World”. Of these, few have had as much of an impact as the experience I endured while applying for a car loan.
            For those of you that want to skip the end, I’ll leave you with this: You should start building credit as early as you can, because your credit history will be absolutely crucial when applying for a loan in your 20’s.
            Now, if you’d like to know the whole story (and how you can avoid the same mistakes I made), I’ll start from the beginning…
            I’ve actually had a credit card in my account since I was 19. I was at home during Winter Break one semester when my Dad told me it was finally time to start building credit in my own name. So, when a student card offer came in the mail with my name on the envelope, I filled out the application, snail mailed it in, and in a couple of weeks I had a credit card with a $250 credit line in my back pocket, collecting dust.
            OK, I made a few purchases on the card – including a pair of concert tickets that were a little out of my price range – but by and large I wasn’t racking up a ton of credit history in my name. (Unbeknownst to me, since I really didn’t have a clue about finances in college. Who needs to learn about money when you don’t have any, right? … Wrong.)
            So, fast forward to a few years later; I had graduated college, moved out to the west coast sans car and was in the market for some new wheels. I had enough for a down payment and what I thought was a pretty reasonable monthly payment, but – and this is a theme in this story – I was wrong.
            As it turns out, having a great credit score (which I had) isn’t always enough to get you a loan in the post-Great Recession world of lending, nor is having a job (which I did, albeit with an entry level income) and references.
            What is important, however, is credit history. And, mine was extremely limited, as I would come to find out.
            So, after getting not one but two loans denied after finding a car in my price range, I had to hit up my Dad (there he is again) to co-sign. So much for being independent…
            However, at the 11th hour and after dealing with a handful of banks, car dealerships and salesmen – my worst nightmare, really – my local credit union stepped in and approved me for a loan with reasonable interest (thanks to my credit score) and a low monthly payment. No co-signer needed.
            The lesson? (Other than the fact that credit unions are awesome.) Building a strong credit history is extremely important when you’re young, and will have a huge factor on whether or not you’ll be approved for a loan in your 20’s.
            So, if you want to avoid the hassle and headaches that I endured, here are a few tips on building your credit in your teens and college years as you prepare for post-grad life in the dreaded real world…
             
             

            Apply for a credit card early

            Since the 2009 Credit CARD Act passed, it’s been a little trickier for under-21-year-olds to get approved for a credit card on their own. However, the earlier you apply for a credit card in your name, the better.
            That being said, make sure you (or your son or daughter) are responsible enough with your finances to own a credit card. You don’t need me to tell you that not everyone is fit to own a credit card, and according to the credit bureau, TransUnion, the average consumer carried close to $5,000 in credit debt in Quarter 3 of 2012.
            One way to alleviate this issue is to start you or your kids with a prepaid debit card. It gets a consumer-in-training in the habit of spending only what they can afford, and works as a great “training card” before applying for the real deal.
             
             

            Use your credit card responsibly and make on-time payments

            Another thing I learned late in the game is that a dormant credit card account only improves your credit score for so long. Creditors want to see you using that shiny new credit card. Otherwise, competing lenders will have little interest in supplying you with credit down the line. (And that’s more or less what your credit score is all about – how appealing you are in the eyes of lenders.)
            Set aside a few everyday items for credit card use each month, don’t splurge on expensive items and keep your balance low so that each month, paying your credit card bill on time is a non-issue.
            Speaking of on-time payments, the number one way you can improve your credit score when you’re young is by making on-time payments each and every month. It’s that simple.
            Seriously, nothing kills a credit score like a missed payment. Make paying your credit card bill your number one priority when it comes to personal finances when you’re young and you’ll be on the road to a great credit score and credit history in your 20’s. Finally…
             
             

            Piggyback your parents’ accounts

            Many consumers aren’t aware that when they add an authorized user to a credit card account, that user can then piggyback the credit accrued by that very same account moving forward. This is another easy way to build credit when you’re young, and can make for an excellent second credit account especially.
            Sure, the conversation might sound a little strange at first: “Good to see you, Mom and Dad! Now can you please add me to your credit card account?” But, if you explain the benefits and the lack of risks involved with piggybacking an account (as long as they’re in good standing, you’re in good standing), then hopefully they’ll oblige to let you in on their good credit.
            Stick to these simple steps and odds are on you’ll have a lot less trouble applying for a loan in your 20’s than I did.

            How about you all? What age were you when you started to build your credit history? Do you wish you started earlier?  

            Share your experiences by commenting below!

            ***Photo courtesy of http://www.flickr.com/photos/glynlowe/7374460750/sizes/l/in/photostream/

            How NOT To Shop Smartly Online

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            Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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            The following post is by MPFJ staff writer, Kelly Gurnett. Kelly runs the blog, Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. You can also follow her on Twitter and Facebook.


            With the hassle and crowds in stores this time of year, it’s no wonder that more and more people have taken to buying most of their holiday gifts online. It’s easy, convenient, you can do it in your PJs, and you can find some terrific online bargains…if you know how to shop smartly.

            Below are several of the most common pitfalls to avoid when it comes to shopping online, for the holidays and throughout the year:

            Overdoing It to Reach Minimum Shipping Requirements

            Lots of sites dangle the promise of “free shipping” in front of you like a carrot, luring you to purchase through them…only to tell you, once you reach checkout, that you only qualify if you purchase a certain amount of stuff. (Missed that fine print and your excitement, didn’t you?) 

             This can tempt you into adding just a few more items to your cart to reach that minimum—items you probably don’t really need, whose cost alone could nullify whatever you’re saving on shipping.

            The solution? Check out FreeShipping.org for a list of stores that offer pro-bono shipping without the minimum requirements. If you’re shopping from a big-box store like Walmart or Sears, see if you can order online but pick up in store. And if you’re shopping on Amazon, there’s a great site called Amazon Filler Item Finder that will help you find items around the price range of that extra $2.17 you need to qualify for “Free Super Saver Shipping.”  You don’t have to search very hard to find something you’ll probably actually use (like a kitchen utensil or a small tool), which saves you from buying that $30 bestseller from your Wish List because the free shipping makes it feel justified.

            Not Paying Attention to Shipping Times

            If you’re buying through sites like Amazon Marketplace and eBay, you’re buying from everyday people all across the country (and the world) who all have their own individual shipping schedules. Even if you buy through the main Amazon site, many items are offered by third-party sellers, whose shipping times can vary wildly. I once nearly ordered an item before I noticed the estimated shipping time was four to six months! (Must’ve been a wildly popular whatever-it-was.)
            The solution? Especially in this season, when time is of the essence, make sure you’re aware of how long it will take for each item to arrive, or you could wind up giving some people cards with pictures of their items and the words “Coming soon!” underneath. (Your best bet, honestly, is to start shopping early so that you don’t wind up paying for last-minute rush fees to get that gift under the tree.)

            Being Lured in by Bright, Shiny Sales and Discounts

            “Half-price on many items TODAY ONLY!” Chances are the items that are on sale are not the ones you need. (And that there will be several more “TODAY ONLY!” sales pretty every day from now till Christmas.) So, don’t buy that designer-whatever just because it’s 70% off unless you actually had “designer-whatever” on your shopping list and this truly is the best deal you’ve seen yet for it.


            “This item sells for $299 $50)” Just because this particular site has slashed its price on an item doesn’t mean you can’t still find that item cheaper elsewhere. Plenty of sites sell items below the manufacturer’s suggested retail price, so simply being below that doesn’t necessarily guarantee you the best deal. (Although the numbers can look awfully impressive.)


            The solution? Have a list, check it twice, and only buy the items you need—at a price you’re sure is the best. Hit up sites like PriceGrabber or BizRate to see what something is selling for across the web.

            Not Knowing Return Policies

            Especially at the holidays, when you find yourself buying items for people who may or may not like them from sites you may not have shopped at before, knowing a site’s return policy is crucial. Even if the gift is exactly what the recipient wanted, anything can happen from the time you place an order to the time that box arrives on your door—things can get broken, the wrong item can be shipped, you can learn the person already got that gift from somewhere else. You never know, so make sure to hedge your bets.


             The solution? Check out the return policies on any new site you visit (or any site you’re not thoroughly familiar with). Make sure there’s at least a 30-day return window and that items can be returned for any reason. Stores that give you free return labels to send items back get double-points.

            How about you all? What mistakes have you made in the past when shopping online? What strategies do you use that seem to work very well?

             Share your experiences by commenting below!

              ***Photo courtesy of http://www.flickr.com/photos/dinomite/6192822061/sizes/l/in/photostream/

              Smallest Balance or Highest Rate – Which Credit Card Should You Pay Off First?

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              Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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              The following post is by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has backgrounds in both accounting and the mortgage industry.

              If you only have one or two credit cards with balances, this question is really no big deal. But if, like a lot of people, you have several cards with balances, this can be a real issue. You’re not only looking for the best way to pay off your credit cards, you’re also looking to do it in a way that will motivate you to see the process all the way through to the end.

              Which method you choose is really more a matter of personal comfort level. The really important issue is that you set a plan to pay off your credit cards, get STARTED and stick to it.

              The case for paying off the smallest balance first

              Paying off the smallest balance first was made popular by Dave Ramsey’s credit card “snowball” technique. The idea is that, if you have several credit cards that you need to payoff, you start off with the smallest one first. The logic is that the smallest balance will be the easiest one to payoff. Once that card is gone, you move up to the next smallest balance, but you have more confidence and it will be easier to accomplish because one of your credit cards is already gone.

              The attraction of this method is that it’s probably the best way to see results quickly and will give you a “quick psychological win.” You’re not concentrating on the amount of debt you have outstanding at this point, you’re really employing a divide and conquer strategy. If you have six credit cards with outstanding balances, and can knock out the smallest one in the first month, right there you’re down to just five cards. That’s progress you can easily see, and that helps with motivation.

              It doesn’t hurt either that with the disappearance of the smallest balance, the monthly payment goes away too. By applying the amount for the payment to your next smallest card you should be able get rid of that one quicker than expected too.

              As a method of paying off credit card debt, this strategy is hard to beat. It’s kind of like knocking out your credit cards domino style.

              If it has a downside, it’s that often by paying off the smallest balance you hardly make a dent in the total amount of debt you have. But, this method is more about psychology than dollars and cents.

              The case for paying off the highest rate first

              From a pure financial standpoint, paying off the cards with the highest rate makes the most sense. Interest is a pure expense, and by going after the high rate cards first, you’re doing a better job of reducing the actual expense, if not the overall monthly payment.

              If you payoff smaller balances with lower interest rates before paying off the higher rate cards, you’re actually allowing your interest expense to accumulate.

              As you payoff the higher interest rate cards first, you’re ensuring that more of your monthly payment will go to principal repayment. Ultimately, that should enable you to pay off all of your credit cards more quickly.

              This method has a downside too. Since high interest rates consume more of your monthly payment it will be more difficult to payoff a single high interest rate card. You won’t see as much progress with this method, especially early on.

              And then, Plan C – payoff the card with the highest payment

              Let’s add a wrinkle to the mix; let’s add still another method. Let’s say that the best credit card payoff strategy might be to first concentrate on the credit card with the highest monthly payment. This method has at least two significant advantages.

              Generally speaking, the credit card with the highest monthly payment is also the one that is most threatening to your budget. By eliminating this card first, you will be removing the largest payment from your budget. That will have an important psychological effect – you will see the most immediate benefit to your cash flow once the card is gone.

              The second major advantage, and probably the bigger of the two, is that once the card with the biggest monthly payment is paid off, you will free up the largest amount of money to concentrate on paying off your other cards.

              There is a downside to this method as well. It’s a very likely that the card with the highest monthly payment also has the highest total balance. If that’s the case it will take a long time just to payoff a single card.

              One way to counterbalance this would be to match payments versus card balances. For example, if you have a credit card that has a balance of $3,000 and a monthly payment of $100, you may want to payoff that card before tackling one with a $5,000 balance and $100 monthly payment. The card with the smaller balance will go away faster.

              The important thing is to start paying your credit cards off

              As you can see, there are various ways to payoff credit cards, no matter how many you need to payoff or what the balances are.

              Choose the method that will most motivate you to finish the job. If eliminating the number of cards you have balances on appeals you, then begin by paying off the smallest one first. If the size of the payment is biggest concern, concentrate on the card and biggest payment. If it’s interest rate then start with the card with the rate that’s the highest.

              Also, you don’t have to use a single strategy. You could for example, choose to payoff the card with the highest monthly payment first. Once that’s done, you can shift to paying off the smallest balances first.

              The most important consideration is finding the method that will make it easiest for you to make your credit card balances go away.

               How about you all? Have you used any of these strategies to payoff your credit cards? Which would you recommend?

                ***Photo courtesy of http://www.flickr.com/photos/dno1967b/6426867439/

                Easy Like Sunday Morning Recap and Roundup – # 11 – December 9th, 2012

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                Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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                Each time, the purpose of the Easy Like Sunday Morning Recap and Roundup series is the same – for me to be able to connect with you, the readers, on a more personal (non personal finance informational transmission only) level, encourage community, and also to give back to the other bloggers around the blogosphere who have mentioned My Personal Finance Journey throughout the past few weeks or so. It’s been about a month since the last roundup, so we definitely have some catching up to do! 

                As far as the theme goes, the title of the roundup gives it away. The roundup theme is named after the Lionel Richie song, Easy Like Sunday Morning (which I play once each time I put this together), to remind us of the importance of slowing down at least every once in a while to take appreciation for that which transpired over the past few days.

                So, without further ado, let’s get started with this edition’s roundup!

                UPDATES FROM JACOB’S PERSONAL FINANCE JOURNEY AND LIFE 

                • As far as my life in general, the months of November and December have been pretty busy, but also enjoyable! Below are some of the highlights:
                  • In my graduate school Alzheimer’s disease research, we were finally able to finish up the follow-up experiments required to respond to the manuscript reviewer’s comments. And, with some luck, it got accepted without further revisions needed! 
                    • If you’re interested in reading up on the type of research I do, you can view the article at the following link in the journal, Biomacromolecules. 
                  • Having finished getting this article submitted, we also decided to turn it in to my Master’s Thesis, so I’ll be doing my defense for that before Christmas this year, and the degree will be conferred/finalized in May 2013. Only a couple more years of grad school now! 
                  • I’m also now 3 months in serving as a Teaching Assistant for a Transport Processes / Fluid Dynamics 3rd year undergraduate chemical engineering class. I’ve really enjoyed the role so far, as it’s given me a chance to teach problem sets for the homework each week.
                    • We just had our last class on Friday, and so now, all we have to do is prepare for the final and that will be over with. Right now, I’m not assigned to be a TA next semester. 
                  • Another thing that I’m very proud to report is that my sister will move in to her new condo that she bought this coming week. Due to the severely-depressed real estate market these days, she was able to get a killer deal/value! Congrats to her for making this big leap! 
                  • At the beginning of November, our younger greyhound, Charlie passed away after losing his battle with some stomach problems that had been pretty severe since June of this year. Below is the last picture we got of Charlie the night before he died on 11/1/2012. RIP 🙂

                  • Today, we’re actually going to a golden retriever kennel to look in to adopting Crystal (see picture below). I’ve wanted a golden retriever for quite some time now, so we’re looking forward to meeting her. She is 8 years old. 

                • As far as my personal finances, the months of November and December so far have been going very well. 
                  • First, in October of this year, I maxed out my Roth IRA contributions. 
                  • Next, in November, I received a very unexpected lump sum inheritance that had been passed down from my great-grandparents. With the help of this, I was able to max out my Individual 401k contributions for the year along with my normal contributions to my taxable Vanguard mutual fund account this month. 
                • As far as my blog goes, November was the second month for My Personal Finance Journey to feature posts by our staff writing team!
                  • As I mentioned in the September roundup, I added several new staff writers to contribute articles for the site on a regular basis to prevent having one to two week breaks between my regular posts while I am busy in graduate school and leaving you all out to dry. Listed below are the awesome staff writers for My Personal Finance Journey! They are all doing a great job so far.
                  • While this definitely reduces the net profit of my site (and vis-a-vis the amount that I have available for the 10% income give back – in the month of November, I broke even), I view this as a HIGHLY worthwhile long-term investment for my site building for the future, so am more than happy to have each and every one of the writers above!  

                  GUEST POSTS FROM PERSONAL FINANCE BLOGGERS ON MY PERSONAL FINANCE JOURNEY

                  Since the last roundup, there was one guest post here at My Personal Finance Journey.

                  If you would like to guest post on my site, please click here to read more details about how to kick off the guest posting process. I’d love to hear from you!

                  BLASTS FROM THE PAST

                  For the first 6 months after I started this blog, I pretty much “blogged in a cave.” What I mean by this is that I cranked out over 200 very good blog articles in this time period, but since I didn’t know any better, I didn’t reach out to other bloggers, get involved with the online community through commenting on other sites, or do any kind of site promotion at all. As you can imagine, some of the articles written during this time period didn’t get the attention that I think they deserved corresponding to the content contained.
                  The Blast from the Past section will feature one old My Personal Finance Journey article each roundup that I feel is high quality, but was published prior to my blog having any sort of real readership. This week’s article is listed below:
                  Why I Sold Out of My Actively Managed Mutual Fund – This post explains my reasoning for selling my last remaining shares/holdings of the only actively managed mutual fund I owned back. I had purchased the mutual fund because I was essentially “chasing returns” after hearing a recommendation from Jim Cramer back in 2007 for the CGM Focus Fund. Enjoy! 

                  PERSONAL FINANCE “MAD PROPS” OF THE WEEK AWARD

                  Every once in a while, when I’m reading an article or site in the personal finance blogosphere, I’ll be so impressed in hearing about what a person did or wrote about, that all I can say to myself is WOW! This section of the roundup will serve as a running “home” for recognizing outstanding achievement.

                  If you know of someone in the PF blogging world that is really doing amazing things, feel free to send me an email for consideration in future roundups.

                  GIVEAWAYS

                  Listed below are the giveaways I’ve come across in my journey through the personal finance blogosphere this week (along with the links so that you can head over and enter!). It’s great to see everyone giving back to their readers through these promotions.


                  If you’re hosting a giveaway and it’s not listed above, please send me an email to let me know, and I’ll get it included in next week’s roundup!

                  BLOG CARNIVALS FEATURING MY PERSONAL FINANCE JOURNEY ARTICLES

                  ·          Investeem hosted the Carnival of Investing and included Are Men or Women Better Investors?
                  ·         Frugal Rules hosted the Festival of Frugality and included How Frugal is TOO Frugal?
                  ·         Term Life Insurance by Jeff hosted the Carnival of Personal Finance and included Are Men or Women Better Investors?
                  ·        Prairie Eco-Thrifter hosted the Carnival of Personal Finance and included Doggy Vet Bills – A Real Life Example of Emergency Fund Financial Planning in Action.
                  ·        Reach Financial Independence hosted the Festival of Frugality and included Are You Guilty of Making Irrational Money Decisions?
                  If you are hosting a carnival that includes (or included) My Personal Finance Journey and I missed listing it here (I don’t get trackbacks since I’m not on WordPress, so I have to rely on direct email and Google Alert notifications), please email me so I can include it in my roundup. Thanks!

                  SEVERAL POSTS I’VE ENJOYED READING SINCE THE LAST ROUNDUP

                  1. Credit Card Negotiator posted at Enemy of Debt.
                  2. Do You Know When to Accept Help posted at Sustainable Personal Finance. 
                  3. Len Penzo posted about Saving Lame Excuses for Someone Who Cares.
                  4. Time is More Valuable than Money posted at Squirrelers. 
                  5. What are REIT’s? posted at Free from Broke.  

                  TOP 10 REFERRING SITES TO MY PERSONAL FINANCE JOURNEY SINCE THE LAST ROUNDUP

                  1. Enemy of Debt
                  2. Free Money Finance
                  3. Festival of Frugality
                  4. Yakezie
                  5. Can I Retire Yet?
                  6. Len Penzo
                  7. Tight Fisted Miser
                  8. Young and Thrifty
                  9. Blond and Balanced
                  10. Wealth Informatics

                  TOP 5 MY PERSONAL FINANCE JOURNEY COMMENTERS SINCE THE LAST ROUNDUP

                  1. Frugal Rules
                  2. Reach Financial Independence
                  3. Thomas S. Moore
                  4. Canadian Budget Binder
                  5. 1st Million is the Hardest

                  BEST READER SUBMITTED QUESTION SINCE THE LAST ROUNDUP

                  This section will serve as a running location for any very insightful, high quality questions submitted by readers throughout the week.

                  If you are wondering something about personal finance, please feel free to email me and ask!


                  MY OTHER SITES

                  Currently, my only other site besides this one is The Carnival of Passive Investing, which runs monthly editions. For the upcoming December edition, we have John Marotta from Marotta on Money as our host. If you have any passive investing posts you’ve written recently, you can submit them to be included in the carnival.
                  However, I have several other domain names purchased, and I am currently learning WordPress Self-Hosted to get these sites live as soon as time allows! I’ll be sure to keep you all updated on progress.
                  Well, that wraps up this edition of the round-up. If you have any suggestions or recommendations for things you’d like to see in this roundup, just let me know by sending me an email!
                  As always, thanks to all the readers for creating such a great community here at My Personal Finance Journey. Your interaction, questions, and knowledge are what keeps me going on this blog!
                  Until next time – Jacob
                  How about you all? 

                  How is the December going for you so far? Are you ready for the Holiday Break?!

                  How Much Do You Save When You Are In Debt?

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                  Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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                  The following is a post by MPFJ staff writer, SK. SK writes about the reasons we get into debt, changing the patterns that get us into debt, and examines small business ownership and real estate investing at her blog, American Debt Project.
                  When it comes to getting out of debt, I am not an expert. 

                  I do have personal experience with it, as I just passed the 50% debt payoff mark, but I am not so vain as to tell you guys that I have found the way to get out of debt and my way is the only way!  

                  To successfully get yourself out of debt, I think the opposite is true. You have to find a way to get out of debt on your own, and implement your plan wholeheartedly to make it work. For many people, saving money when getting out of debt is counter-intuitive. If you are not actively investing that money, it’s simply sitting there as cash or earning measly 1% interest, while paying off debt means you are getting rid of a liability with interest rates anywhere from 6% (student loans) to 29.99% (really sub prime credit cards). 

                  So why should you have any money saved when you have debt that is costing you more money? Let’s consider both sides of this issue.

                  $1,000 Emergencies Happen All the Time

                  This is a Dave Ramsey tenet of financial wisdom. Basically, Ramsey says before paying off debt, you should set aside $1,000 to be able to deal with unexpected emergencies without using a credit card. 

                  But, let’s consider my case. In the 18 months since I got serious about paying off my debt, I only had one unexpected expense over $1,000. I decided to pay off my car 9 months ahead of schedule because it significantly reduced my monthly bills and improved my debt-to-income ratio. I’ll admit, if I hadn’t set aside that money in savings, it would have been tough to make this move. However, it was not an emergency. It was me making a decision to not let my savings just sit there. I’ve had some situations come up over the past 18 months (including lending someone money), but I was able to manage it within my normal expenses and some scrimping.

                  Do emergencies happen? Yes. Anything can happen! But in my case, I think it makes more sense to use $1,000 productively when you have over $20,000 in debt (I currently have about $18,000 in debt left to pay off). In many instances, you will have a few days to deal with a situation and can round up the money needed by delaying payment on other items.

                  You Don’t Want to Have Nothing When You are Finally Debt Free

                  I have heard others insist that it’s important to have savings so that when you are debt free, you are not back at zero, where it is easy to fall back into debt. Although I contribute at least 15% of my income to my retirement accounts, other than that, I will likely not have very much in savings when I pay off all my debt.

                  Am I afraid I am going to right back to my old habits and charge up a storm on my credit cards? No! Because that’s exactly the point, I am not afraid anymore. I have been arm-wrestling myself daily for the past 18 months to get over bad habits and impulsive spending. It’s OK to be nervous about the next step when you are finally consumer debt-free, but it doesn’t mean you have fear. You are strong enough to do what you need to do. I personally think the $1,000 buffer is just a mental pacifier, meant to soothe you into thinking you “have things covered”. But you might not always need it and that money could be better spent elsewhere.

                  What do you think? Are you saving and paying off debt? Are you just paying off debt with no savings at all? Let me know!

                    ***Photo courtesy of http://www.flickr.com/photos/68751915@N05/6736138697/sizes/l/in/photostream/

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