Some people (including financial gurus) are extremely anti-credit card. And I get that. It's easy to spend money you don't really have, the interest rates are killer, and the minimum payments mean you could be still paying for your gallon of 2% years from now.
But . . . we use a credit card.
Bart had one when we got married and had never once carried a balance on it. I'd never been a credit card user previously.
Five years later, I can tell you that a credit card works well for us. I like the security of a credit card (if your cash gets stolen or accidentally thrown away or lost, you're just out of luck - not so with a credit card). I like that I can account for every penny spent on it by checking my online statement rather than thinking "didn't I have a $20 in here yesterday?"
I know, also, that this is fairly uncommon, but it's HARDER for me to spend with a credit card than it is with cash. With cash, I have no paper trail - I can pay and be done. With a credit card, not only do I have to think about my purchase when I make it, but I have to think about it again every single time I look at the statement and then when I pay it (can you tell I look at our statement many times a month?).
We have a Southwest credit card and we put absolutely everything on it - gas, groceries, our cell phone bill, the internet bill. If I could pay our rent on it, I would (well, technically, I believe I can but it would be $25 a month, so that clearly would be a bad call). We get probably two free round-trip tickets a year on it, which definitely makes it worth the $59 fee to us (I called to see if they'd waive it. They would not).
For us, it works.
What about you? Do you use a credit card? Avoid them like the plague?
Showing posts with label Credit Cards. Show all posts
Showing posts with label Credit Cards. Show all posts
Mar 3, 2011
Oct 4, 2010
Budgeting Software Giveaway (Carole)
With the holidays just around the corner, we thought it would be fun to have a week full of giveaways!
Today's giveaway is Dave Ramsey's Personal Finance Software, version 5.4.1 -- It appears to work exclusively on a PC, so if you win our random drawing and own a Mac, we'll choose something else for your prize.
On to the topic for the day. . .
To help us all escape this terrible fate, please take a moment to share with everyone how you and yours keep to your budget through the highly commercialized holiday season. Even though many of us are frugal, frugal, frugal, we are more than happy to learn a new trick or two. In fact, it's the reason we love this blog!!
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Sep 27, 2010
What Would You Tell a Teenager About Money? (Carole)
A few weeks ago, I was asked to speak about money to the teenaged girls in our church congregation. Thanks to all of you and your many good comments on this blog since January, I felt like I knew what kind of information would be most interesting and helpful to these girls who are just on the cusp of adulthood.
Here's what we discussed:
1. Getting a job and saving 50% of what you earn while in your teens. I also shared with them examples of impressive teenagers I've known through the years and the amounts of money they've been able to save in their bank accounts by the time they graduated from high school.
2. The cost of tuition at local and out-of-state colleges and universities. We even took a look at the cost of elite schools like Harvard and Stanford, just so they would know.
3. Typical salaries of standard jobs: surgeon, fire fighter, grocery store clerk, pilot, flight attendant, lawyer, school teacher. . . and what the monthly take-home pay (after federal taxes) would be for each of these jobs. So. . .is a college education really worth the time and money invested for your particular profession?
4. How much adult life costs: housing, groceries, transportation, utilities and insurance. True to one of my previous examples of teaching children about money, I brought in $3,000 (which is a typical take home salary if you make $50,000/year -- the average salary in Las Vegas) in cash -- in $10 bills. Together we paid the bills of a typical family in southern Nevada. Much to their surprise, we ran out of money, long before we ran out of bills. This was very eye-opening to this lovely group of girls.
5. How compound interest works. We walked through how compound interest works in your favor if you're saving money or investing, but how it works against you if you're paying off a loan or a credit card bill. We also discussed how the length of the loan (or investment) and the interest rate influence your payment (or return) and the total you will pay (or earn) over the lifetime of the loan (or investment).
It was a fun night, and I felt like the girls were right with me. But I'd love to know what YOU would have said to them? What do you wish someone had told you at their age?
Here's what we discussed:
1. Getting a job and saving 50% of what you earn while in your teens. I also shared with them examples of impressive teenagers I've known through the years and the amounts of money they've been able to save in their bank accounts by the time they graduated from high school.
2. The cost of tuition at local and out-of-state colleges and universities. We even took a look at the cost of elite schools like Harvard and Stanford, just so they would know.
3. Typical salaries of standard jobs: surgeon, fire fighter, grocery store clerk, pilot, flight attendant, lawyer, school teacher. . . and what the monthly take-home pay (after federal taxes) would be for each of these jobs. So. . .is a college education really worth the time and money invested for your particular profession?
4. How much adult life costs: housing, groceries, transportation, utilities and insurance. True to one of my previous examples of teaching children about money, I brought in $3,000 (which is a typical take home salary if you make $50,000/year -- the average salary in Las Vegas) in cash -- in $10 bills. Together we paid the bills of a typical family in southern Nevada. Much to their surprise, we ran out of money, long before we ran out of bills. This was very eye-opening to this lovely group of girls.
5. How compound interest works. We walked through how compound interest works in your favor if you're saving money or investing, but how it works against you if you're paying off a loan or a credit card bill. We also discussed how the length of the loan (or investment) and the interest rate influence your payment (or return) and the total you will pay (or earn) over the lifetime of the loan (or investment).
It was a fun night, and I felt like the girls were right with me. But I'd love to know what YOU would have said to them? What do you wish someone had told you at their age?
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Jul 21, 2010
The Magic of Compound Interest (Carole)
When you are investing money, there are two basic types of interest your money can earn: Simple Interest and Compound Interest.
Quickly, let's look at the difference between these.
Add this interest earned to your original $10,000
The formula is a bit complex and hard for me to type out, but you can look it up here if you just really need to see it for yourself.
Monthly Interest = $27,126.40
Yearly Interest = $26,532.98
The longer your money is invested the more interest you'll earn. Your same $10,000 at 5% for 30 years turns into $43,219.42 Same money, same interest for 40 years is $70,399.89
The higher your interest rate, the more interest you'll earn. Your same $10,000 at 10% for 20 years will become $67,275.00
Combine longer time and higher interest and it starts to get really fun:
$10,000 at 10% for 30 years = $174,494.02
$10,000 at 10% for 40 years = $452,592.56
$10,000 at 12% for 20 years = $96,462.93
$10,000 at 12% for 30 years = $299,599.22
$10,000 at 12% for 40 years = $930,509.70 (yep, nearly a million $)
Imagine if you could scrape together only $10,000 by age 20 and find a good mutual fund that paid 12% interest (not that difficult really) and just LEFT YOUR MONEY THERE until you were 65 years old, you would have $1,639,876.04 That's without you ever adding one more cent of principal to this investment. The sooner you can get investing in something earning a decent interest rate, the better off you will be at retirement.
That is magic. If you want to work some magic yourself, here is a compound interest calculator. I'll warn you -- it's addictive!
P.S. Your mortgage (or car payment, student loan, credit card bill. . .) works on a compound interest formula in your lender's favor. That is why you often end up paying 3 times the cost of your house by the time your loan is completed.
Quickly, let's look at the difference between these.
Simple Interest
(Interest is only calculated on the money you have invested):
If you invest $10,000 (your principal) at 5% interest for 20 years:$10,000 x 5% x 20 years = $10,000 (interest earned)
$10,000 + $10,000 = $20,000
Compound Interest
(Interest is calculated on your invested money PLUS your previously earned interest):
If you invest $10,000 (your principal) at 5% interest for 20 years with compound interest you'll end up with $26,532.98 . The formula is a bit complex and hard for me to type out, but you can look it up here if you just really need to see it for yourself.
In addition:
The more often your compound is calculated (daily, monthly, yearly) the more interest you will earn. Daily Interest = $27,180.96Monthly Interest = $27,126.40
Yearly Interest = $26,532.98
The longer your money is invested the more interest you'll earn. Your same $10,000 at 5% for 30 years turns into $43,219.42 Same money, same interest for 40 years is $70,399.89
The higher your interest rate, the more interest you'll earn. Your same $10,000 at 10% for 20 years will become $67,275.00
Combine longer time and higher interest and it starts to get really fun:
$10,000 at 10% for 30 years = $174,494.02
$10,000 at 10% for 40 years = $452,592.56
$10,000 at 12% for 20 years = $96,462.93
$10,000 at 12% for 30 years = $299,599.22
$10,000 at 12% for 40 years = $930,509.70 (yep, nearly a million $)
Imagine if you could scrape together only $10,000 by age 20 and find a good mutual fund that paid 12% interest (not that difficult really) and just LEFT YOUR MONEY THERE until you were 65 years old, you would have $1,639,876.04 That's without you ever adding one more cent of principal to this investment. The sooner you can get investing in something earning a decent interest rate, the better off you will be at retirement.
That is magic. If you want to work some magic yourself, here is a compound interest calculator. I'll warn you -- it's addictive!
P.S. Your mortgage (or car payment, student loan, credit card bill. . .) works on a compound interest formula in your lender's favor. That is why you often end up paying 3 times the cost of your house by the time your loan is completed.
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Apr 2, 2010
A Peek at the Promised Land (Carole)
A few weeks ago, Tara commented that she didn't see the point in being frugal, frugal, frugal just so she could be a millionaire when she and her husband are 80! What is the fun in that?? Maybe some of you have had the same thoughts as you've thought about coupon-ing, garage sale-ing, eating at home. . . Hopefully, I can give you a glimpse at where this whole Frugal Life thing is really headed.
If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years. We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money. We paid minimum payments for a number of years, and then we got religion. We paid off our car in about 8 months and our student loans in about 2 years. So we paid off all our consumer debt in right around that 3 year mark. We weren't making tons of money and we had 3 children. We were extremely average. You could probably pay things off faster than we did.
Our next step was paying off our house. We knew a couple of families our own age (early 30's) who had paid off their houses. We were AMAZED. Could we do that too?? How long would something like that take? We owed about $160,000 on our house at the time. As a little family we confronted this monumental financial goal with everything we had. We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house. Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle. We often gathered our 3 girls into the room while we marked off the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!! Did we starve through this time? Live on nothing? Never leave the house? No, we actually took a few pretty decent vacations along the way and fed and clothed everyone. Probably saw a few movies too. But we stuck to our house payback schedule. We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail. That is a moment never to be forgotten.
We paid that house off in 1996. In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district). We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice). We paid off this new mortgage in about 2 years. I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing. I can't even explain it. It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen. The last $30,000 was paid off about 5 months earlier than scheduled -- both times. When you get to that point, let me know if this happens to you too!
So, when you've paid off all of your debt -- in under 5 years probably -- how does life look? It is an amazing place to be. Think of the amount of money you bring home every month in your paycheck. Now think of how much it would cost you to live with no major bills. No credit card payments, no car loans, no student loans, no house payment. Can you even wrap your mind around that?
You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes. That's about it. Hmm. How much would that add up to in a month? Not very much. All the rest of your take home pay is YOURS. Wow.
What will you do with it?
Saving is a big thing. Putting as much money as you can into tax-free or tax-deferred programs is very smart.
Beyond that, you can spend it on anything you want. You could buy a new car with cash -- every few months! You could buy a brand new boat in cash, also in just a few months. You could redecorate your entire house. Put in a backyard pool. You can be generous beyond anything you can imagine. Travel to Europe, Asia, Africa -- every few months. All for cash.
You will finally be free. All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU. All in about 5 years.
Enjoy.
If you have credit card debt, car loans and/or student loans, most people (when you finally get very serious about it) can pay all of it off within 3 years. We have never carried credit card debt, but we've had a few car loans and we had over $60,000 in student loans back in the 1980's -- so about $130,000 in today's money. We paid minimum payments for a number of years, and then we got religion. We paid off our car in about 8 months and our student loans in about 2 years. So we paid off all our consumer debt in right around that 3 year mark. We weren't making tons of money and we had 3 children. We were extremely average. You could probably pay things off faster than we did.
Our next step was paying off our house. We knew a couple of families our own age (early 30's) who had paid off their houses. We were AMAZED. Could we do that too?? How long would something like that take? We owed about $160,000 on our house at the time. As a little family we confronted this monumental financial goal with everything we had. We printed out an amortization schedule (numerous pages of small type -- very scary), and taped it ALL to the back of the door where the bills were paid in our house. Every month when we paid our regular house payment, we also added as much extra $$ as we could scrape out of our home budget and sent that along to the mortgage company too -- that extra money goes straight to the principle. We often gathered our 3 girls into the room while we marked off the payment amount with a highlighter pen and circled all the skipped interest payments that NEVER HAS TO BE PAID-- EVER!! Did we starve through this time? Live on nothing? Never leave the house? No, we actually took a few pretty decent vacations along the way and fed and clothed everyone. Probably saw a few movies too. But we stuck to our house payback schedule. We threw everything we could at this debt and in 3+ years we received our title, free and clear, in the mail. That is a moment never to be forgotten.
We paid that house off in 1996. In 2003 I wanted a bigger house (we had more children, the older ones were larger, and we wanted to live in a better school district). We found the house we wanted and went back into a $100,000 mortgage (we were able to pay for MOST of the house with cold, hard cash from the sale of our first house -- that felt very, very nice). We paid off this new mortgage in about 2 years. I thought I would mention here that both times we got down to the last $30,000 on our mortgage, extra money just started appearing. I can't even explain it. It's like the Lord knows you are serious about taking care of your family and your finances, so He blesses you beyond anything you've ever seen. The last $30,000 was paid off about 5 months earlier than scheduled -- both times. When you get to that point, let me know if this happens to you too!
So, when you've paid off all of your debt -- in under 5 years probably -- how does life look? It is an amazing place to be. Think of the amount of money you bring home every month in your paycheck. Now think of how much it would cost you to live with no major bills. No credit card payments, no car loans, no student loans, no house payment. Can you even wrap your mind around that?
You still have to buy food, electricity, gasoline, car insurance, clothes, property taxes. That's about it. Hmm. How much would that add up to in a month? Not very much. All the rest of your take home pay is YOURS. Wow.
What will you do with it?
Saving is a big thing. Putting as much money as you can into tax-free or tax-deferred programs is very smart.
Beyond that, you can spend it on anything you want. You could buy a new car with cash -- every few months! You could buy a brand new boat in cash, also in just a few months. You could redecorate your entire house. Put in a backyard pool. You can be generous beyond anything you can imagine. Travel to Europe, Asia, Africa -- every few months. All for cash.
You will finally be free. All the hard work you (or your spouse) puts in to bring home money, will finally benefit YOU. All in about 5 years.
Enjoy.
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Mar 10, 2010
Flying for Free (Carole)
Don’t try this at home.
I’ve mentioned in the past, that my husband and I do not have a personal credit card. This is still true. However, we own a business, and the business has a credit card, and has from the day we opened our doors. We’ve used several different credit cards over the past 20+ years, but none have given us the fantastic rewards that we’ve earned in the last 2 years with our Southwest Airline Rapid Rewards VISA credit card.
16 Rapid Rewards credits earn us a free round-trip ticket anyplace Southwest Airlines flies!! You have to spend $1200 on your card to earn one credit. That means that a round trip ticket costs you $19,200 in credit card purchases. Now, if I were trying to earn a free ticket through this credit card on a home account, it would probably take me a whole year to earn one ticket. But a business has much larger bills than a home does, and many, many of those bills can be paid with a credit card. Our little business earns us one free round-trip ticket nearly every month. That is something to shout about!
We’ve used other credit cards in the past that offered Sky Miles or other kinds of travel deals. And even though we were spending the same amounts of cash with them, it always took over a year to earn even one round trip ticket – and then there were so many restrictions and black-out days, that it was hardly worth the trouble. Often, our Sky Miles points would not cover the entire cost of the ticket. I don’t know what weird formula these other card companies use, but it certainly wasn’t in our favor.
Southwest Airlines though offers a very simple program, and it has really worked for us. We’ve been able to use our RR credits for many free trips over the past couple of years, we’ve also flown our children out to visit, and helped out a few others who have had a need. They’ve been such a blessing.
Like any credit card, we treat this business card with great care. We watch our purchases very carefully, we try to use it mainly to pay monthly bills, and we pay it off EVERY MONTH.
If you have difficulty with any of those three items, then stay away from any and all credit cards in your business. Work with cash.
But if this seems like it could work for you, take my word for it – it’s a great deal.
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