Pimp Your Finances

I saw a great list that I had to re-post here. It’s a list of 10 lies that got you (and keep you) in credit card debt, originally posted at Dough Roller.

It may be a month old, but it’s just as relevant as ever. After all, I’m still battling my credit card demons.

So how does their list of lies compare with the lies I’ve told myself? Let’s take a look. I’ll run down their list, then add in a few of mine.

 

1. It’s an emergency

Even if we have an emergency fund, we may not really be using it for emergencies. If life or liberty isn’t at stake, it’s not an emergency.

This is something I’m about to fall for. I’m going to use my emergency fund to pay for some home repairs. While not an emergency, I still consider it urgent, as I could end up with long-term drainage problems if I don’t do something soon.

 

2. We deserve it

I think we’ve all used this to justify some unnecessary purchases before. We worked hard. We had a stressful week. I’ve been doing good. There is never any shortage of excuses.

However, doing things because you “deserve” them only sets you back an equal amount. If you’re not careful, you’ll end up with a constant stream of celebrations, but no progress to back it up.

 

3. It’s a bargain

When you find deals, the question should still be “do I need this?”, not “how much am I saving?”

Buying something you don’t need is never a bargain, regardless of how much money you’re saving.

 

4. It’s not that much money

Small charges add up. It’s easy to dismiss $5 or even $20 there because it doesn’t seem so bad on its own. But if you’re already carrying debt, it’s even more expensive than you think.

And even though it’s a bit of a cliche, if you can cut back on $20 a week, it adds up to more than $1000 a year.

 

5. The payment is small

When making big purchases, you should consider the total cost (and interest), not just the minimum or suggested payments that you’re given.

A small example is buying a big-screen TV. You can go to any store, and they’ll gladly point out how it can be yours for only XX dollars per month.

Or on a bigger scale, you can shop for houses, and banks will tell you that you can afford to pay XXXX a month on your mortgage.

But it’s never that easy.

Their plans almost always never include interest, or any of the details. What happens after the initial grace period wears off? What about finance charges? Property taxes? Etc….

The devil is in the details.

 

6. The card rewards make it worth it

Reward cards can be a good deal – if you pay off your balance every month. But if you keep a less-than-ideal card and carry debt just for the sake of those “free” rewards, you’re really getting hosed.

 

7. 0% Introductory purchases

It’s a good deal while it lasts, but the whole point is to let you build up a big balance before the introductory rate turns into a high interest rate that you can never get out of. Don’t fall for it!

 

8. 0% Introductory balance transfers

Again, these can be a great deal. I’m using a few to save at least hundreds, possibly thousands now.

But if I don’t pay off the cards before the intro period wears off, I’ll end up getting burned. It’s a good deal, you just have to make sure you don’t fall for their trap.

 

9. It’s for my business

Credit cards can be a valuable tool for businesses, just like consumers. However, you don’t want to say “it’s for the business” as your excuse to spend whatever you want. You have to show restraint, just like you would in your personal life.

 

10. I’ll pay it off after graduation

Ah, I’ve said this before! Sure, build up debt in college. You’ll have a real job after you get out.

But a funny thing happens… it takes longer than you think to find a job. Or you can’t find one that pays what you hoped. Or even if you do, your spending goes up anyway.

You should judge your spending on what’s happening now. Now what you hope or expect to happen in the future.

 

…and now for a few I’ve learned from my own experience.

11. I’ll start paying down my debt… next month

It’s easy to make the decision to change, but the hard part is following through. If you know you have a problem and need to stop, do it NOW! Don’t put it off until next month, or it will keep getting put off.

 

12. Things will be different once I make more

You assume that as you make more, you’ll have less problems with money. In reality, the opposite normally happens.

You can’t just assume that once you get a raise, you’ll start using more of it to pay down debt. You have to have a plan ready, as well as the intentions to actually do it.

 

13. But this time is different!

After you’ve decided to get out of debt, you’ll inevitably face some hurdles. Hurdles that make you want to throw caution to the wind, at least one more time.

Maybe some unexpected crisis has come up. Or there is are concert tickets, gifts, or a dress you just have to get. Normally you wouldn’t indulge, but this time is different!

You tell yourself that after this one last purchase, you won’t make any more with your credit. But it always happens again.

Debt is a slippery slope. Try to quit it cold turkey if you can.

 

I hope you enjoyed their original ten lies, and my additional three. Hopefully I’ll be putting them all behind me soon!

Should five percent appear too small,
Be thankful I don’t take it all.
‘Cause I’m the tax man
Yeah, I’m the tax man

- The Beatles, “Taxman”

Well, it’s that time of year again – tax day! Hopefully you haven’t put it off until the last minute. If you have, you should probably be working on your taxes…not reading blogs

If you’re already finished, I’ve got a great set of links for you.

• Green Panda Treehouse has a great article on 5 Things to Do to Build Wealth in Your 20s. It’s an older post, but I just found out about it this week. Your early years are the best ones to make an impact on your finances, thanks to compound interest. And all 5 of his things are realistic.
• Gen X Finance put together a list of 20 Free Online Finance Courses. The best investment you can make is in yourself, and many of these classes are offered by colleges like MIT, Yale, Rutgers, Purdue, etc…. I plan on signing up for a few of these!
• LLama Money writes about Debt Motivation, and how we’re going about things backwards. Instead of going into debt for purchases, assuming we’ll be able to pay it off later, we should be saving first then indulging ourselves.
• Punch Debt in the Face (a site I just discovered this week) has an article asking What’s Your Favorite Dumb but Fun Expense? Mine? probably music and alcohol.
• Stetchy Dollar has some more tips for Converting a Super-Spender to a Frugal Saver. This is the second part of a two-part series.

And for the fun link, I’m going to keep it seasonal. The company behind Peeps, those marshallow chicks that we love to eat every spring, hosted a diorama contest. You can check out the Peeps on Parade 2009 Finalists here.

 

I hope you have a good week!

It was a pretty good week for me in the carnivals. Unfortunately I won’t be in as many next week, but we’ll see if I can redouble my efforts again.

Make sure you check out some of these carnivals… the hosts put in a lot of time and effort to put together the best articles they can.

 

The ABCs of Invested hosted the Carnival of Personal Finance, and included my interview with Ramit Sethi. Make sure you check it out – it’s a 3000 word interview with the author of the latest PF best-seller, “I Will Teach You to Be Rich”.

I Pick Up Pennies hosted the Carnival of Everything Money, and included my post on 26 Tips for Surviving Your First Job.

Weakonomics hosted the Carnival of Twenty Something Finances: Final Four Edition. It was a great theme, and he included my article on Ten Tips for Young Investors? The Media Doesn’t Get It.

Money TLD hosted the carnival of Personal Development – Gandhi Edition, and was nice enough to include my post on Paying it Forward, Every Day.

And last but not least, Kavmerica hosted the Carnival of Economics, and included my article on Canned Goods and Condoms – What are People Still Buying?

 

Sorry if I haven’t been replying to comments as quickly. I’ve had some family and friends over recently, and I’ve got to give priority where it’s due. I’ll be back in full force next week though!

Move over Jon Stewart. Jim Cramer has a new feud, and this guy has some serious economic credentials.

His latest enemy is Nouriel Roubini, a NYU economics professor often known as “Dr. Doom” for his bullish take on the economy.

I laugh at your puny rally and feeble notions of recovery

Roubini first caught my attention back in July, 2008, when he said that the recession was only half over, and would continue for another 12-to-18 months. He also added that although we’re in:

…the worst crisis since the great depression…

we’re not heading into financial Armageddon, or even a Japanese-style prolonged period of stagnation.

Earlier this year, he was back in the headlines, when he admitted that things were worse than he thought. Instead of 12-18 months (which would’ve been between July 09 and Jan 10), he revised his estimate to 24-36 months (I’m assuming that this is from the original prediction, but can’t tell for certain).

The Cramer feud began on March 25th, when Roubini spoke to Bloomberg Magazine and said:

The stock market is a bit ahead of the real macroeconomic and financial news…. We’ll have some major banks going belly up that will need to be taken over.

Also on March 25th, Roubini wrote an editorial in the New York Daily News in favor of Secretary of Treasury Timothy Geithner’s toxic asset plan.

While largely in favor of the plan, he ended by pointing out that the government may have to take drastic actions if it still doesn’t work:

What happens if removing toxic assets from a bank’s balance sheet at near-market prices shows it is effectively insolvent? Then we will have to face the elephant in the room. We may then have to start asking, “Why keep insolvent banks afloat?” And having asked that, we will have to search for ways to manage the ensuing systemic risk.

By the next day, Cramer was already on the attack. He opened his blog on The Street.com with the following insult:

Noriel Roubini, the New York University professor intoxicated with his prescience and vision, comes out with the astounding view that “some” U.S. banks will be nationalized. Forget that we have had one of the largest rallies in history since the oracle of Greenwich Village spoke last.

What I think matters is that I don’t know anyone who would disagree with him. It is obvious that more banks will be nationalized. What has mattered since the beginning of this crisis is that we have a few banks that are not going to be nationalized.

Read the rest of this entry »

Forbes recently published their list of self-made billionaires, but more important than who is on the list is what they have in common.

I’m not saying that you should try to follow their path, as they’d certainly be considered outliers in the financial world. Instead, we can learn about their way of thinking, and apply it on a smaller scale in our own lives.

Here is what Forbes found out about the 657 self-made billionaires they studied:

• Many had parents with a high aptitude for math
• The most common professions are engineers, accountants, and small-business owners
• Nearly 2% worked at Goldman Sachs early in their career.
• 20% never completed college
• Those who made their money in finance are the most educated – 55% have graduate degrees, and 90% of MBAs got their masters from Harvard, Columbia, of University of Penn’s Wharton School of Business
• Several suffered “bitter professional setbacks” early in their careers, but consider them valuable learning experiences

There were a few other commonalities, but they’re too specific to really be applicable (unless you’re considering working at Goldman Sachs or joining a secret society like Skull and Bones).

Here’s what I’ll try to apply in my own life:

 

Education is key

Even though 20% didn’t finish college, they all know the value of a good education. Getting a degree is still the best ticket we have towards a lifetime of higher income – and job mobility. The skills we learn in college and on the job can be applied towards finance and entrepreneurship, and vice-versa.

Another takeaway is that a strong understanding of finance and economics is critical for success, regardless of what your career is.

 

It’s important to do your own thing

Many of these people left a successful career (or dropped out of college) to go into business for themselves. Even if you don’t start a business full time, there are always things you can do to supplement your income as well as broaden your horizons.

 

You learn more from your failures than your successes

The lessons you learn from mistakes and failures will stick with you more than any success. That’s why billionaires consider early failures something that helped them in the long run.

Failure early on is necessary condition for success, though not a sufficient one.

- Pharmaceutical tycoon R.J. Kirk

I recently had a surprising experience with customer service. Or pre-customer service, as it were.

As you may know from previous posts, I have a problem with drainage on my property, and have made it a priority to fix. I have water flowing towards the house in a few places, and that could cause problems with my basement walls and foundation.

To fix it, I decided to put in additional drainage in three spots, as well as a small retaining wall to make sure I fix the problem the first time. Because of the importance of drainage (and the difficulty I had in putting in a previous retaining wall), I decided to hire someone to do this project.

I used the yellow pages to find contractors in the surrounding area that specialize in the type of work I need. I called 10 people, and asked to setup a time for an in-person interview. Even though I contacted the businesses and basically said: “I’m looking to spend several thousand dollars. Will you help me?”, only 5 called me back.

Of those 5, only one person showed up on time. The rest showed one hour late, two hours late, five hours late (showing up at 5:30 on a Friday night without calling first), and a day late (although they did at least call before showing up on Saturday).

After an in-person inspection, four of the companies promised a written estimate as soon as possible. One expected me to pay him $5000 without so much as a written estimate or statement of work. No thanks.

And even though it’s been two business days (four days altogether), I still only have one estimate. It’s no surprise that it’s from the lone company that showed up on time.

Simply put, I’m amazed with the lack of professionalism.

We’re in a recession, right? Shouldn’t businesses be trying harder for my business? I thought I’d be an ideal customer: someone with an urgent need to have thousands of dollars of work done, and wants to pay for it in cash. Maybe I’m just weird to expect customer service to improve when the market is more competitive and demand for work is down.

I had hoped that companies would act like they are eager for my business. At the very least, I expected them to return my calls, show up on time, and follow through on their word in a prompt manner.

I know that not all businesses are not like this, and the ones that practice good customer service are the ones that will survive the recession. As for me, I’ll be “voting with my dollars”, and going with the only company that showed up on time and gave me an estimate when they said they would.

Ah. I love spring. Nothing better than working in the yard during the day, then grilling out at night with a cold beverage.

In addition to mowing the yard, planting new grass, and planting wildflowers, I’ve been doing some Financial Spring Cleaning as well. It’s a list of what I’ve been up to recently, but what is everyone else doing? Let’s take a look.

 

Living Almost Large writes about The Importance of Customer Service. This is something I can relate with, as I’ve suffered some poor customer service recently (more on that later this week).

Bargaineering has a Credit Score Q&A with Liz Weston. Liz is a great financial writer, and one of the few that targets the younger audience. You can never take your credit score too seriously, so make sure you check it out.

The Oblivious Investor has a good post warning: Don’t Let Your Ego Get in the Way. Sometimes, the things you think you know are even more deadly than the things you don’t. Make sure you recognize your limits.

The Checkbook Diaries has an article on the importance of Diversifying Your Financial Mind. The best investment you can make is in yourself. Make sure that learning is part of your financial road map.

And last, but not least, Christian PF has an intriguing article about how Money Doesn’t Solve Money Problems. If it did, you wouldn’t hear about professional athletes and lottery winners going broke.

 

And for the fun link this week…10 Commercials that are Exercises in WTF.

 

Hope you enjoyed this week’s roundup. And spend some time outside!

The Interview

Today marks a special day for me – my first interview!

Your Money Relationship has a weekly segment called Saturday Sneak Peakwhere he interviews up and coming bloggers. This week, he’s chosen me! It’s quite an honor!

Make sure you check out his post to see me answer the following questions:

1. What inspired you to start a PF blog?
2. You have had some pretty rapid success getting your name out there over the past few months. How do you explain that?
3. Which article has been your favorite so far?
4. Do you think we’ll ever have too many PF blogs?

 

The Guest Post

I’m also really proud of a guest post I have up at Divorced Dad Frugal Dad. It’s about a topic that is very close to me: grilling!

In it, I share all my Top Tips for Backyard Barbecues.

• Choosing meat
• Freezing/thawing
• Preparing meat
• Preparing the grill
• Cooking

I take grilling very seriously (as does Divorced Dad Frugal Dad), so make sure you check it out. Now is perfect time to be outside cooking, and you just might learn a few things.

 

I hope you have a good rest of the weekend!