My Personal Finance Journey

Category Archives for Saving Money & Frugal Living

Build Your Credit Score From Nothing – Part 1

Build Your Credit Score/History from Nothing – Part 1

“Credit Card for Your High Schooler”

Back in 2006 while I was taking a finance class at a local community college, I was informed of the cash-back benefits of having and spending money on a credit card. Therefore, in my normal curious way, I went online and tried to apply for one of these credit cards.
The result? I found out that I had little to no credit history available (and certainly not enough for them to grant me use of a quality credit card). I then began to ask around about the reasons for this. What I found out were essentially three things that I could do (but hadn’t yet at the time) to build my credit score. These three topics will be the centerpiece of the four-part blog series that will follow.
Part 1 – Help Your High-Schooler Build His/Her Credit Score by Getting Them a Credit Card in Their Name
As I mentioned previously, one of the reasons that I did not have any credit history was due to the fact that through high-school and college, I never had a credit card account that I paid off over time. 
What I did have was a credit card with my name on it that was requested as an add-on to my Dad’s credit card account. Because it wasn’t a separate account, it just involved HIS credit history and had nothing to do with me except for me being able to use it since my name was on it. That make sense? Good!
In my opinion, what I should have done in high-school was to apply for a separate credit card/account (in my name) for what’s called a “student credit card.” See the link below for a listing of student credit cards. Essentially, student credit cards are great starter credit cards because they require little to no credit history to sign up, and they start out with low credit limits to reduce the risk of overspending and accruing large amounts of credit card debt.

It should be noted New Federal laws impose restrictions on issuing credit cards to individuals under 21 unless the applicant has the independent ability to repay debt, or has an adult co-signer who agrees to accept joint liability for the account. Having an adult co-signer on the account is OK, as long as it is a separate account, in the teen’s name.


Now that you are convinced of the efficacy of this idea, what’s the best way to go about setting this up for your teen?

1) Go to the link above. Select any one of the credit cards (DO NOT GET A PREPAID DEBIT CARD) that has no annual fee to apply for.

2) Fill out the application for the selected credit card, placing yourself, the parent, as a co-signer if needed.

3) Once you are approved, wait for the credit card to come in the mail.

4) When it comes in the mail, take the opportunity to sit down with your teen and set up his/her online account for them. This is also a great tool to use to teach your child all sorts of personal finance tactics! Explain that the card will not be used for everyday purchases, but instead, to build his/her credit score for the future.

5) Next, since this is a starter credit card, you have two options in my opinion: a) Set up some kind of automatic, recurring payment using the credit card each month, or b) Write yourself and your teen a reminder each month to use the credit card for one or two purchases on a set day.

6) Do not give the credit card to your teen. Place the credit card in your wallet or purse and explain that you will hold on to it for safe-keeping.

Well, that’s it! Not too hard right?! This will give your child a great financial head start on life in no time!

Important Tip – closing credit card accounts hurts your credit score

After you have opened up a student credit card account for your child, used it for some time, and built up a good amount of credit history, you may be tempted to close the account, since you (or your child) really don’t need it any more.

However, closing down the old credit card account will actually lower your credit score in two ways:

  • First, it decreases your credit history, which accounts for 15% of your credit score.
  • Second, it increases your credit utilization rate (% of the total credit available to you that you currently use).

So, the key takeaway here is that if the credit card is no longer used, lock it away in the family safe, check the balance every month or so to make sure no fraudulent activity is occuring, and go about your life!
Keep an eye out for Part 2 of this series coming soon. Please subscribe to my blog feed using the link below to have it sent to you immediately once it is published!

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Keep on learning!

Jacob

Go to – Build Your Credit Score From Nothing – Part 2 – “Pay housing bills in your name”

Ways to Maximize Benefits of Your Credit Card – Part 2

My Money Blog Homepage
In Part 1 of this series (see link below), I explained a method for getting the most from your credit card by slowly requesting increases to your available credit limit.

Ways to Maximize Credit Card Benefits – Part 1

Part 2 of this series will focus on another, and probably even more important, way to manipulate your credit card company for your financial gain.

2) Tip Number 2 – Request credit card interest rate decreases

A very beneficial lesson that one of my college professors taught me (please note that this was the one class that I took at a community college and probably learned more about personal finance than in my regular finance classes) was to call every so often to your credit card company and simply request a decrease in your credit card interest rate.

I tried this a few months ago and was able to get my interest rate decreased from 19% to 11%. Wow! That is a lot of money if you ever are someone who has to carry a balance from month to month! The steps I used that worked fairly effectively are shown below:

1) Turn your credit card over, call the 1-800 customer service number on the back of your card.
2) Press whatever button you need to in order to talk to a real live breathing person.
3) Ask for the department that handles interest rate level requests.
4) Tell the person that you are considering switching to another brand of credit card and that you would like to request a decrease in your interest rate.
5) They will process the information and give you the result!

It is that simple!

What’s the right frequency to call and request this type of thing? For this type of request, I only call every year or so because I don’t actually have any use for a lower interest rate because I pay off my credit card in full each month.

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Keep on learning!

Jacob

Ways to Maximize Benefits of Your Credit Card – Part 1

This is part 1 of a series of ways in which you can maximize the benefits of the credit cards you use. It is truly amazing how you can take advantage of things you never knew just by asking! So, let’s get started!
1)   Tip Number 1 – Request credit limit increases
The first way that you can maximize the benefits of the credit card you use by simply asking questions is to make sure that you currently have the maximum credit limit possible.
While I do not suggest that you use the added credit amount to make additional purchases, I believe that it is always beneficial to have extra funds available in your credit card credit limit in case of emergencies (examples include – being stuck at the airport in Argentina after a trip and having to buy an emergency ticket home, etc).
The method to request a credit limit increase is simple: 1) pick up your credit card, turn it over to the backside, and 2) call the 1-800 customer support number listed and select whatever option you need to to talk to a real, warm-blooded person. 3) Then, simply ask the customer service operator that you would like to request a credit limit increase. 4) They will then ask you the amount that you want to increase your credit limit. I have had good success with requesting a 33% increase over your current credit limit. 5) They will then ask you if it is all right to access your credit report. Tell them this is all right. The system will then process your request and tell you if you are approved or not.
A quick note here: 
Since requesting a credit limit increase requires the credit card companies to access your credit score, make sure you do not request limit increases too often or on multiple cards at once. This could possibly negatively affect your credit score.
It’s that simple! I have had great success with this method. Recently, I was even able to get my credit limit increased from $8,000 to $12,000 on one of my credit cards. Not a bad jump all at once!
To summarize, I follow the several rules regarding these requests:
1) Only place requests for credit limit increases every 3 months to avoid negative effects to your credit score from frequent accessing.
2) Request credit limit increases gradually, 33% at a time is a good number.
Part 2 of this series will be coming soon! Subscribe to the blog feed using the link below to be notified when it comes out!

Have fun and keep on learning!

Jacob

Go to Ways to Maximize Benefits of Your Credit Card – Part 2 – “Request interest rate decreases”

Frozen Vs. Fresh vs. Canned Vegetables

Well, turns out you really do learn something extraordinary every day! As I was cooking beef teryaki tonight at my apartment (using a package of frozen vegetables), I wondered to myself, “Are frozen veggies as nutritious as fresh?”
I then proceeded to go online, and to my shocking dismay, I found out that FROZEN VEGETABLES ARE ACTUALLY HEALTHIER (not to mention cheaper) THAN FRESH VEGGIES. Sounds to good to be true uh? Think again!
In the articles below, it states that since frozen veggies are picked at the peak of ripeness when vitamins are the greatest, they contain much more nutritive properties than the fresh version of the same vegetable. This is due to the fact that fresh veggies are picked before they are ripe and lose a lot of their vitamins to UV exposure and heat on the way to market.
What’s the morale of the story? Find ways to improve the taste of frozen veggies, save money, and be healthier!

http://www.associatedcontent.com/article/2398100/are_frozen_vegetables_healthy.html

http://www.eatingwell.com/nutrition_health/nutrition_news_information/fresh_vs_frozen_vegetables_are_we_giving_up_nutrition_fo

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Keep on learning!

Jacob

Cost of Pet Products

Recently, I have decided to provide foster care for a dog that is being rescued from execution (being put to sleep) at a high-kill shelter in Ohio. The dog is a young, fluffy, golden retriever/collie mix that was picked up as a stray at the beginning of February 2010.
The reason I opted to provide foster care for a dog as opposed to adopting/buying a dog was that I didn’t think I could commit at this time in my life to providing care for a dog for the long-term, especially since I do not have a private yard/house. Also, the foster program I am teamed up with is very supportive, and they actually pay all of the veterinarian bills for the dog (very nice!).
So, I decided that I needed to go to the pet store to get prepared for the new guy. When I went to the pet store (Pet’s Plus) in the town I live in here on the East Coast, I was appauled at the high cost of pet products these days, and was curious to find out a little more.
The thing that suprised me the most was the range in price of the pet products. For example. you could get dog food starting at $10.99 (Gravy Train) or get organic dog food (same weight) for $70.00. Furthermore, you could get a plain metal water/food bowl for $8.99 or a fancy ceramic one for $40.00.
To further investigate, I did a quick online search, and I found the two articles below that describe in detail the full cost of owning a pet/dog.

http://www.aspca.org/adoption/pet-care-costs.html

http://www.moneyunder30.com/the-true-cost-of-pet-ownership

The total that both websites come up with is that the total cost of owning a pet for the 1st year is $1200-$1500. Wow! The key takeaways from this investigation, for me, are shown below.

Key Takeaways

1) Before buying or adopting a dog, be certain that you can financially committ to the animal for its lifetime. This could indicate that you will spend ~$10,000 total over the lifetime of the animal.

2) Determine if you are capable of getting the emotional return on investment from having a pet. Make sure that you truly will enjoy it and are not just doing it “because everyone else is,” etc.

3) When buying pet products, SHOP, SHOP, SHOP, and COMPARE, COMPARE, COMPARE. There will no doubt be a wide range of product/price alternatives to consider. Also, realize that many times, products sold at discount stores such as Wal-Mart or grocery stores can cost significantly less than the same products at fancier pet stores.

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Keep on learning!

Jacob

New YouTube Channel Created for My Money Blog followers

I just created a YouTube Channel/group where I will review financial movies on YouTube that I find interesting. You can access and subscribe to the Channel at the link below.

http://www.youtube.com/BlogMyMoney

How do my living expenses compare after switching from living in Virginia to living in the Northeast?

Since recently moving from Virginia to the Northeast (philly suburbs), I frequently get asked how the cost of living compares between the two places. So, here ya go world! :) After all, you have to love how right now, gas in philly is $2.79 per gallon while in Virginia, it is $2.59 per gallon.


Virginia Living Expenses (per month)

A nice, spacious 1 bdrm apartment – $750
Water, trash fee, sewer – included (no extra charge)
Electricity (includes heat) –  $50
Internet – $35

VA Total = $835

Philly Suburbs Living Expenses (per month)

A nice, spacious 1 bdrm apartment – $1300
Internet – $38
PECO Electricity bill – $38
Renter’s Insurance – $15
Trash fee – $5
Water service fee – $9
Sewer service fee – $11.14
Gas-cooking fee – $5
Gas Bill (heating) – $31
Electricity processing fee – $17
Gas service fee – $7

Philly total = $1476

As one of my friends would say, FANTASTIC!!!

And the kicker is…get ready for it! There is no adjustment in pay for this cost of living difference…So, by working in a cheaper place, you are basically giving yourself an automatic raise! Food for thought next time you’re searching for jobs.

Buy VHS Tapes Instead of DVD’s = A lot of savings

One of the best ways that I save on entertainment these days if by buying VHS tapes instead of DVD’s.

Where to find VHS players – These days, VHS players are pretty hard to find, but if you go to pawn shops or look on eBay, you can pick one up for a good price. And, it will definitely pay for itself along the way! See the eBay link below if you have trouble finding one.
http://shop.ebay.com/?_from=R40&_trksid=p3907.m38.l1313&_nkw=vhs+player&_sacat=See-All-Categories

A good example of the savings you can receive from buying VHS instead of DVD was highlighted to me when I recently purchased two of my favorite trilogies – Lord of the Rings and Indian Jones

Price Comparison –

Lord of the Rings – $23 for DVD trilogy (see link below), $9.99 + free shipping for VHS trilogy. Same movies, half the cost!

http://cgi.ebay.com/The-Lord-of-the-Rings-Trilogy-Widescreen-DVD-Theatrical_W0QQitemZ220542984862QQcmdZViewItemQQptZUS_DVD_HD_DVD_Blu_ray?hash=item335962e29e

http://cgi.ebay.com/Lord-of-the-Rings-Trilogy-4-VHS-Tapes-FREE-SHIP_W0QQitemZ360227432476QQcmdZViewItemQQptZVHS?hash=item53df3a681c

Just an idea to think about next time you want to buy a movie! Let me know of your success stories!

Reasons to shop at Walmart

Wal-Mart is a very controversial topic for some people. Growing up in the midwest near the home-headquarters for Wal-Mart, you would hear nothing but good things. However, things are a little different in the Northeast, where it can be viewed as the root of all evil in putting down the little guy. While I understand both points of view, I request that you put those aside in reading this and focus on the economics of the situation.
I do as much shopping as possible at Wal-Mart, and have since I started buying my own groceries the 2nd year of college. The question that came to my mind was how much have I saved in doing this? So, I recently set out investigating answer to this….

I found the following good news article relating to this topic at the link below.
http://walmartstores.com/FactsNews/NewsRoom/8594.aspx

At this website, you can go to another link where you can find a pdf document with the details of a complex study done by the Global Insight Group showing that shoppers can save $700 per year by shopping at Wal-Mart. Wow!

So, let’s look at what that has meant for me in the past several years since I have been shopping at Wal-Mart (2005-2009). Multiplying $700 per year times the 5 years would yield a total savings of $3,500.

Assuming that I placed this money in my Roth IRA account and invested it until retirement at the age of 65 years old (and assuming the 80 year historical average return of 12.4% in the stock market), this would result in a nest egg of $600,854 at the end of the 41 year period. Applying the effects of inflation to this sum (assume 3.2%), this would yield $165,159.

This is quite amazing if you ask me!

Student

Why do I not sign up for a gym membership and not sign up for cable?

Some people sometimes ask me if I sign up for a gym membership or cable TV. It may be fairly surprising, but the answer to both of these questions is “no.” Let’s tackle the reasons one at a time.
1. Why do I not sign up for a gym membership?
Personally, I believe that investing in yourself and your health is one of the best possible things you can do. It is something where you are guaranteed a return on your investment by longer life, more happiness, and better health. Therefore, I feel that making sure that you exercise is a crucial part of life. For most people, this is through the outlet of having a gym, usually through a monthly gym membership payment.
For me, however, not having a gym membership forces me to get outdoors and exercise, even in the cold winter months. Once I get over the mental block of getting out in to the cold, I am always glad that I went. Also, at my work, there is a free small gym that I use when it is raining or bitterly cold outside. It doesn’t have EVERYTHING you need, but it has the essential items such as a treadmill, free weights, and elliptical machine.
2. Why do I not sign up for cable TV?
This is somewhat more of a straightforward answer – it is due to TVM (time value of money). Let’s look at an example.
A typical cable TV subscription generally costs $40 per month. My Netflix subscription costs $15 per month. Let’s assume that I continue to pay for Netflix instead of cable from now (Age 24) until retirement at Age 65. Each month, I will take the cost differential ($25) and invest it in a general market index mutual fund, assuming a 12.4% return annually.
What would the balance of the account be at the end of that time period? If we do the math through the use of an Excel spreadsheet, we find that the value of the account becomes $290,000 at the end of the time period.
This is definitely food for thought when thinking about how much you get out of cable TV…..

If you are interested in seeing what Netflix has to offer (which I would highly recommend because they offer instant movie watching on your computer as well as rental DVDs), click on the link below to start your free trail!

Keep on learning!
Jacob
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