I'm a Credit Card Hypocrite

Credit Card Hypocrite

The other day my wife and I were shopping for a new laptop, she changed jobs and were without a computer for the house, unless you include "my computer" which my wife purchased around 2006, it has no battery so it must be plugged in at all times, cannot download pretty much anything because of a certain error message about running a program that from a drive, and heavens forbid you X out of something, it could be another 15 minutes before you are able to get back on, and did I mention you also cannot restart the computer or shut it off without unplugging it.  Oh yeah it's a Peach!  But I digress........ 

We did our research on computers before hand and had maximum budget before taxes, she knew pretty much what she wanted between 1 or 2 computers, it really came down to the size of the screen, which was a difference of $200.  Because my wife and I keep our separate accounts and one joint account for items we equally contribute for ie mortgage, food, utilities, etc  this purchase was all her, I can deal with the Peach listed above.  I like any loving husband gave my wife advice on the purchase as we were doing the research together.  I said and I quote "I would put the purchase on a credit card you might as well get the miles/cash bonus for a purchase you plan to make anyway"  HYPOCRITE!  Now I haven't used a credit card for I believe about 2 years ago to make a large purchase of Airline tickets.  I am credit card debt free and I have been the anti-credit card guy since then.  So why am I giving advice to use a credit card? 

It all starts with what I can control and what I cannot control.  My wife is smarter than I am and I can't make her not use a credit card, I can do my best to influence her and provide her as much information on why you shouldn't use a credit card.  Dave Ramsey for example mentions a study that says credit card use at McDonald's found that people spend 47% more when using credit cards instead of cash (http://www.daveramsey.com/article/the-truth-about-credit-card-debt/).  Now I believe the difference is we are not making a random purchase, this is a planned purchase with an expected amount that we have in cash available for this purchase.  So my turning point would be I believe if you are making a large planned purchase, cash available in your checking account, it is not against the rules(Finance and Fitness Dreams Rules).  If you are able to get an extra $10(1% of $1000) for this purchase.  This makes the assumptions that you will pay the bill in full and on time, which definitely factors into the decision.  There is many factors that need to be considered, but as I have mentioned previously I am not going to use a credit card to make purchases, now or in the future, I have loan debt to pay off and I do not feel comfortable putting any amount of money on my own personal credit card. 

My advice for my wife is slowly progressing to putting ALL purchases on the debit/checking, but like any habit, one of the hardest things to do is stop doing it "cold turkey" so we are working on a process of gradual reduction.  My wife has been in the habit of grabbing whatever card is in her wallet, debit or credit and making a purchase.  We have slowly progressed to using 1 credit card only to make purchases, then using that 1 credit card to make only business expenses.  She has since changed jobs and no longer needs to make purchases on the credit card for business expenses.  After January 2014 is over in theory there should be zero purchases on the credit card and only debit purchases.  Because we tend to travel a credit card purchase will be in the mix in the form of airline tickets, car rental, hotel, etc and I think it is in our best interest.  I will pay cash directly to my wife when these purchases are made.  It's not a credit card free life, but it is certainly still heading in that direction while we work our way to Financial Independence, 

6 years 4 months and counting..................... 

Automatic Plan-Make things Automatic-Make Paying off Credit Cards a Priority

Automatic Plan-Make things Automatic-Debt, Savings, and Investments

1. Figure out Where all of your Money is Going
2. Make things Automatic-Debt, Savings, and Investments
3. Make paying off Credit Cards a Priority
4. Add additional payments to the Debt you like the least
5. Pay off home early
6. Make sure you and your loved ones are taken care of
7. Build wealth and give!

If you have read my blog before you know I hate credit cards.  I have done almost everything wrong with credit cards, besides maybe paying late and who knows maybe I did!  Here is a small list of stupid things I have done with credit cards:

• Pay for my entire Spring Break and not have money to actually pay that

• Balance Transfer and not be able to pay off the debt before the 0% ends

• Open up Store Credit Cards with very high interest rates

• Use the Card to Buy inventory for my business

• Basically live off of my credit card for 3 months

All of these bad ideas, all of them cost me so much money over the course of probably 12 years of credit cards.  I now have $0 credit card debt and love it.  So what did I do to accomplish this,  I chose the credit card I hated the most, easy selection for me Citibank and paid them off first.  I took every dollar I had and threw it at the credit card.  Spare change, refunds, extra money from side jobs, raise, bonus, whatever I had all towards paying this off.  It worked, it took some time but it worked.  I then had another credit card that I owed money on and due to a small financial windfall paid that off as well.  But it would have been the same thing, take every extra dollar you have and put it towards those stupid credit cards.

Once you have accomplished paying off your credit cards, stopped accumulating any more debt, and have officially cut up those credit cards, pat yourself on the back step 3 is in the books.  Make paying off your credit cards a priority, they are the worst.  They have the highest interest rate, get you into the most trouble, and overall are just a curse for 99% of the world.   So cross it off the list and say good-bye credit cards.

Why I think Dave Ramsey's a Genius, But I Want My Own Plan!

I agree with Dave Ramsey, his way works, but why can't others.  I instead of going with his steps I am going with my own priorities.  I think that you need to live and enjoy things while you are young.  I believe that you need to pay for items in cash or have money saved.  For example if I want to go on a trip and it costs $2,000, then I will have $2,000 in the bank before I take that trip.  I will put together a couple of steps showing what I believe and what I am currently doing.

http://www.daveramsey.com/new/baby-steps/

Here's the process:

1. $1,000 to start and Emergency Fund
2. Pay off all debt using to Debt Snowball
3. 3 to 6 months in savings
4. Invest 15% of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give!

I have a plan, but Dave Ramsey has a proven plan so he wins.  But here has been my working plan.

Automatic Plan

1. Figure out Where all of your Money is Going
2. Make things Automatic-Debt, Savings, and Investments
3. Make paying off Credit Cards a Priority
4. Add additional payments to the Debt you like the least
5. Pay off home early
6. Make sure you and your loved ones are taken care of
7. Build wealth and give!

I'll go into more details as the blog moves on, but my approach is geared more towards the person who has all there bills online, the person who gets online statements.  Be Young, Have Fund, Drink My Kool-Aid.

Credit Card-Necessary Evil or Necessary Tool

So as I look back, I see numerous errors I have made with my credit card, here are just a few:

• Purchase my Spring Break Cancun on my C.C.(this doesn't mean Country Club)
• Do balance transfers with the hope to pay off the bill before interest rate goes up, while still buying stuff on my C.C.
• Living off my C.C
• Not keeping track of what I actually spend

Trust me the list could go on, but this hits some pretty major violations on what credit card companies want you to do.  I have since paid off my credit cards, with the help of my wife and have begin using my credit card as a tool.  There are many things I don't like about using a credit card, but I have decided to stick by these 3 major rules:

1. Keep track of what I am spending
2. Make sure I have enough money in my checking/savings to pay the bill by the due date
3. Be very careful, remember how much I dislike Citibank I do not want to give them any money ever

So just recently I went through and put together a spreadsheet on what I spent(We are using the card for Housing expenses only with one exception of our most recent Hawaii Trip).  I noticed that per our savings we are able to cover the entire balance.  So I followed Rule 1 and 2 with paying extra attention to Rule 3.  Now we do need to be very careful because the card was intended to be used for house purchases only, so if there was a Rule #4 I would have violated it.  I did however follow all the rules and know that the balance can be covered. 

The lesson I take out of this is I want to not use my Credit Card ever again and it may be possible in the near future, but as of right now I am treating it like both a Tool and Evil, if I do use a credit card in the future it must be this way!

Owning a Home-Buying Appliances

Finance is about saving money and making money.  !So viva la casa y la finanzas! 

Today after some research we have decided to buy our appliances for our home.  We are buying appliances for the rental Unit 1 and for our Unit 2.  We looked at Home Depot, Lowes, Sears, basically all the big box stores.  We ended up going with a place closer to home and recommended by our contractor, Abt.com.  They have great appliance packages, we were told and researched that Frigidaire is a good brand and less expensive than the other major appliances.  The house did come with a brand new GE stove so a stove was not needed in the package.  This is the package we purchased for right around $900 not including tax.

Since we wanted an upgrade and the wife wanted something a little nicer and not to forget we will be living in the house for the foreseeable future, we went with a GE stainless steel package, shown below.  This package is right around $2300 not including tax.



So all said and done right around $3400 with tax to have all the appliances on both floors, I'm happy with that.  We will also be purchasing a Washer and Dryer in the near future but that's for another day, Labor Day to be exact.

So the results here was to do our research, ask for recommendations, and go with what we liked.  In the end I like our decision.

 Wondering how we paid for it?  Me too!  I'm just kidding.  We used our Citibank Dividend Credit Card(I hate Citibank, strong words I know), but we are only using this card since I've had it for quite some time to put all of our house expenses under one roof(funny guy over here).  We will be paying the card off fully each month, I have almost the entire amount saved up from my eBay business, the rest will be paid from savings.  I know we can get better cash back and such, but we just bought the house and to go through the hassle of applying with new addresses and researching which card is better all for a small amount of money is not worth it for me.  I will fight another battle, another day, with another financial institution.  Viva la finanzas!