The Passive Dad » Debt Elimination Strategies

Overthrow the Credit Card woes

Jessie — Mon, 12 Jul 2010 12:47:09 +0000

That big bad term ‘credit card’ gives me the heebie-jeebies even just typing it. For so long they’ve been embraced as a convenience in an increasingly commodified world. But are they really worth it? How can we get maximum benefits out of them with minimum costs?

PREVENTION

Don’t be so credit card happy. It’s easy to get lost in a mindless routine of flipping over your CC for daily purchases. Use a debit card for more control over your finances, linking your own purchases to your own money.

LOOK OUTSIDE CC COMPANIES

Building societies, credit unions and independent brokers usually offer competitive rates. It is useful to browse the options available to you to maximize the benefits and to customize a credit card plan that suits and rewards you.

INTEREST-FREE DAYS

If you have strong affiliations to your credit card, and the thought of life without it is unfathomable, learn to use it with ‘interest-free’ days to get the most out of it and avoid accruing bank fees. Try to pay the majority of your expenses of these days and pay your monthly CC off in full using only one of the free transactions to optimize usage and saving on fees.

KEEP ON TOP OF THOSE REPAYMENTS

Daunted by paying anything more than the minimum repayment? Try it. You may be surprised at how much debt you avoid by paying more than the minimum and avoiding added interest and fluctuating rates.
REPAYMENT OPTIONS

Good with repayments? Choose a credit card that rewards you for paying it off efficiently. Rather than using a credit card that fluctuates rates, choose the 0% balance transfer offer and be happy that the dent in your pocket disappears more quickly.

BALANCE CHECKS

Revert to the phone, the Internet or ATMs to regularly check your balances and avoid going over the limit. Maxing out the CC is an easy thing to do and the banks can make a fortune from penalties arising from this.

MULTIPLE CARDS
For some, even the thought of more than one credit card can result in stressful body compulsions. However some may enjoy the benefits of using multiple credit cards by choosing which ones to use based on the lower interest rate offered at the time. While this can get complicated and involves keeping three eyes on your daily bank affairs, it CAN work and save you money at the end of the day!

With a bit more research, you can retrain your brain and eager hand to think twice about which card to play. Information is readily available online, so browse the banks, reassess your accounts and you may just find you’re usually carrying an ace up your sleeve.

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Would You Buy A New iMac 24″ or Fund Your Emergency Savings Account With Your Tax Return?

Scott — Thu, 12 Feb 2009 09:44:26 +0000

photo credit: Paul Keleher

You just received your 2008 tax refund, do you have an eye on the new 24″ iMac or will you put it towards your emergency savings account? Will you use the tax refund to pay off credit cards, save for a vacation, or maybe start investing in the stock market? I wonder if the current economic recession will cause people to set money aside for a rainy day or start an emergency savings account that can pay for car repairs or doctor bills. Maybe you will use the tax return to fund your child’s 529 college savings account this year. Here are several changes my family is making in 2009 with our tax refund:

1. Change tax withholding amount. We have received a refund for the past two years and we need to adjust our return so that we don’t continue loaning the government “free” money.

2. Add funds to our emergency savings account. Our goal is to have 1-2 years of savings in our ING Orange account for emergencies in case we lost our jobs for an extended period of time.

3. Add additional funds to college 529 plans. We chose Vanguard for our 529 college education plan as they have low fees, great funds, and an easy to use website. Since our children are young they can benefit from the current prices of S&P 500 stocks.

What is tempting to do with our money:

1. Buy a new imac 24″ computer for my home office. Yes, I love macs and have had my eye on the new imac for several months. I’ve visited our Mac store several times and asked dozens of questions, and I think I’ve impressed my wife that I still didn’t buy one. My plan is to convert my Powerbook into a desktop by finding a separate LCD monitor and external mouse. Total savings $2,000

2. Buy a new vehicle. It’s tempting to upgrade to another SUV or minivan that would give our family some more legroom, but it just doesn’t make financial sense right now. Many of our friends swear by the Toyota Sienna, but we have yet to make the purchase. Our vehicles run great and they both have over 100,000 miles, but are both paid off. It’s hard to make another car payment just for a little extra leg room.

3. Buy a new refrigerator. Kind of strange that I would even put this down as one of the things I would buy with our tax return, but our fridge is driving me crazy. Each time a guest comes over to our house, they say that it’s annoying to open up. When we bought our first home our GE refrigerator fit perfect, and in our current home it’s not a counter depth model. It sticks out a good 4″ and the right door hits our kitchen door each time you open it. Very annoying, but our refrigerator works fine. How can I justify spending $800+ for a new one?

So how will you be using your 2008 tax refund? Emergency savings account or 24″ iMac?

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California Tax Refund Could Be Paid Via IOU

Scott — Mon, 02 Feb 2009 13:00:55 +0000

This isn’t the game Monopoly where grandma would give you a written IOU if you couldn’t afford her red hotel on Park Place, this is reality in 2009 where a California tax refund could be paid via IOU. What does this mean for Californian’s? We could be receiving an IOU or note from the state government that will be paid when funds are available. How long could this take? We don’t know, as the state doesn’t have a budget and county workers are having to take unpaid leave in order to bridge the budget deficit. According to an MSNBC article, back in 1992 the State of California went through a similar IOU with state workers. In 1992 the workers were paid back the salary and it also included a 5% interest rate. Sounds good, right? My ING Orange account is only paying 2.4%. But wait, how will California’s pay bills that are due? You can’t write an IOU for your rent or mortgage. And last I checked, Costco doesn’t take an IOU either.

What are your options right now?

1. Hope that California passes the 2009 budget within the next few weeks.

2. California receives emergency funds from the U.S. Government.

3. You start or add funds to your emergency savings account.

4. Buy a California lotto ticket.

5. Borrow money from a relative to pay bills.

6. Charge bills to your credit card.

7. Ignore your bills.

8. Get an extra job or increase hours.

Of the choices above, the only one that I am counting on is #3 and #8. I’ll keep adding funds to my emergency savings account and continue to find ways to cut expenses each month. Trying to find additional sources of passive income will also help in the long term. I sure hope this budget mess is resolved quickly in California and we can again focus on growth.

You are probably also wondering why someone would provide a tax free loan to California and receive a tax refund. Well, some taxpayers would rather receive a refund than owe the state. Maybe you received some additional income or did not adjust your exemptions after having a child. If we receive an IOU from the state, I can guarantee that we will be updating our exemptions immediately.

What measures are you taking to ensure you have cash available through the tax refund season? Do you count on a refund each year?

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Good News For Your Budget: Starbucks To Close Another 300 Stores

Scott — Thu, 29 Jan 2009 17:57:51 +0000

photo credit: nedrichards

Starbucks announced yesterday that they will be closing another 300 stores as demand for the pricey coffee continues to decline. According to a memo sent out by Howard Schultz, Starbucks continues to be challenged in this tough economic time. I have written a couple posts about my Starbucks addiction and how I was spending over $2,000 a year on coffee. I guess more customers have taken business to Dunkin Donuts or now do what I do and brew Costco Starbucks beans. It’s actually more convenient to brew my own coffee as I don’t have to wait in line or drive to a local Starbucks. My beverage of choice back in 2007 was a cafe Americano which is espresso and hot water. I’ve downgraded a bit, but still love saving a ton of money by brewing my own morning Joe.

Are you a Starbucks addict? Will you miss your local Starbucks if it closed?

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Primerica Coming To Discuss Personal Finance Options Tomorrow

Scott — Fri, 23 Jan 2009 13:30:12 +0000

My wife has a friend coming over tomorrow to discuss our personal finance goals for 2009 including life insurance and I believe our investments as well. I’ve never heard of Primerica, did a quick google search, and found that they have been in business for years selling life insurance policies. Primerica also is part of Citigroup, so I’m surprised I’ve never heard of them before. My wife did not give me any other info other than we are meeting with her to discuss financial goals. Since I’m a “hand on” personal finance type, I’m curious what she will want to discuss. Since it’s the beginning of 2009, I figure now is a good time to review our insurance policies for home, autos, and life. Not sure what she can do with our investments, but won’t hurt to ask.

Has anyone used Primerica for life insurance or investments?

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My First Impression Of Mint.com For Managing Personal Finances and Budget

Scott — Thu, 22 Jan 2009 13:00:34 +0000

Can Mint.com solve one of my personal finance goals for 2009? I’m a little late with one of my goals for 2008, so it’s now become my new 2009 goal. Finding a free or relatively inexpensive software program to track personal finance transactions and establish a budget for my wife and I. Since transparency seems to be the catch phrase of 2009 with banks and financial institutions, I thought it would be important to focus on this same issue with family finances. I seem to be the keeper of passwords, bank accounts, and financial records, so it was important to find a way to share this info efficiently with my wife. It also helps that she has an iphone for work and has access to one of the coolest applications ever.

Yes, Mint.com has an application for the iphone that allows you to see your daily net worth and track your spending plans. It’s actually killing me that I don’t have an iphone right now, so I’m trying hard to justify why I need one. One word, I don’t. Can I afford $70 a month for cell service? Yes. Should I spend $70 on cell service? Nope. When can I purchase an iphone? When I create another stream of passive income that nets at least $70 a month.

Time to put the iphone out of my mind for now. Mint.com has the ability to track all of your bank accounts, investment accounts, credit cards, car loans and more. I was even surprised to see my paypal account and Prosper.com account could be linked to Mint. The most powerful part is the ability to track daily transactions through credit cards and bank accounts. Mint will even give you suggestions for saving additional money on credit card offers or higher interest rates through savings accounts. This is how Mint makes money on this service, and it’s an option that you don’t have to accept. I’m perfectly happy with one of my banks, but I could choose to open an HSBC account and earn slightly higher interest. Is it worth jumping from bank to bank, chasing higher interest rates? It could be.

I did have one major issue when trying to link my ING Orange account with Mint. I kept receiving an error message that an invalid username or password were used. I finally reset my 5 personal questions on ING, answered them, then saved. In a separate web browser I answered the same 5 questions on Mint in the same order and pressed enter. Success, finally the ING Orange account was linked to Mint.

I’m still working on establishing a budget through Mint and creating user defined categories for transactions. Many of the categories I had on my Excel spreadsheet can be utilized on Mint. Easy to create custom categories for things like 529 savings plan or Preschool tuition.

What do I wish Mint had? More reports for financial planning. Reports that showed future growth of savings at current interest rates or growth of my retirement account. I realize this can be done on other investment sites as well, but would be nice to have in one place.

What’s the best feature of Mint? The fact that my wife and I can have access to the same personal finance information in real time is amazing. Total transparency and the ability to have access to this information quickly is priceless. Many hours I have spent trying to manually update our budget spreadsheet and transactions are now available for more family time.

Have you used Mint or another personal finance software for your family budget?

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If You Could Relocate, Would You Move To Cut Costs and Save Money?

Scott — Wed, 21 Jan 2009 13:00:08 +0000

photo credit: ILoveButter

We are all trying to cut expenses and make the most of each paycheck, but what if you could increase your take home pay another way? Would you relocate and move your family to make your dollar stretch even further? Do you have a dream of moving your family to a small town where the pace of life is slower? Worried that the local shopping mall is tempting for you or your teenage kids?

What if you could relocate with your current employer and drastically cut your home mortgage payment? Add to that, your home insurance, car insurance, and many other expenses. Where would I first look? Lot’s of places online such as Realtor.com can allow you to daydream or research what a home would cost in smaller towns. I started researching towns outside of the Bay Area to find out where the dollar would go a little further.

Some things I kept in mind during my research:

1. Schools. Check schools test scores and see how they compare to your current district. It might be better. If you home school, this won’t be an issue.

2. Property tax. If you are moving out of state, be sure to check the local property tax rates. If you are moving from California, you might be surprised to see rates higher in Texas or New Jersey.

3. Insurance. Your home insurance and car insurance rates may decline as you are moving to a smaller town. Less crime, lower rates.

4. Public transportation. Here in Northern California we have Bart and train service to Sacramento area. New Jersey and New York have a great train system as well. Could you extend your commute to your current job? Would the trade-off in time and expense outweigh the cheaper mortgage payment? You also might be able to telecommute on the train.

5. Friends. Maybe you have a friend that recently moved and they love the new home. You could allow them to get settled and test out the new community before you make the plunge. Keep in touch with them and find out what they like about the new town and what they don’t.

How much would you have to save on your home mortgage or rent in order for moving to make financial sense to you? $500 a month or $1,000 off your mortgage payment? Maybe you love your friends, family, and town and could never move.

Need more inspiration? Here’s an article from MSN where people have made the move to small towns.

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Do You Qualify For A Mortgage Bailout? Tips To Help With A Loan Modification

Scott — Tue, 20 Jan 2009 13:00:26 +0000

I have discussed home mortgages modification, mortgage bailout, credit scores, and even bankruptcy with several friends over the last few weeks. All of them have a similar question and that is “How do I negotiate with a lender if I can’t make my mortgage payment?” It looks like many lenders will work with borrowers, but the fine details are a bit tricky to maneuver. One friend is going through a bankruptcy but wants to keep his home, and now the mortgage lender is trying to work with him. Interesting that the lender did not want to negotiate prior to the bankruptcy. Unfortunately, it appears that you need to be late on your payments in order to qualify for help from some lenders. I found an interesting article that interviewed a family that recently negotiated with a lender.

Indymac has established some rules for qualifying for a loan modification:

1. Mortgage loan needs to be at least 60 days past due.

2. You can’t pay your mortgage and don’t have any way to make your payment. No savings accounts.

3. You can’t file for bankruptcy.

4. A loan modification must make sense to your bank or investor holding your note. The bank won’t modify the terms if you still can’t afford the new monthly payment.

5. Bank will pull your current credit score and also evaluate if you would be a qualified candidate.

It’s unfortunate that you need to be at least 60 days past due to get the attention of your bank. What the family in this MSN article did accomplish is to reduce the monthly payment by a few hundred dollars. The couple still won’t be able to afford the new monthly payment as they have had some serious health problems and job cuts.

Have you tried to negotiate with your lender? Have you been successful with a loan modification?

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How One Couple Paid Off $30,000 Of Credit Card Debt

Scott — Fri, 16 Jan 2009 13:00:09 +0000

photo credit: inkynobaka

I came across an inspiring story about a couple that managed to pay off $30,000 in credit card debt and is now saving $500 a month. The Dunleavey’s tackled the credit card debt problem head on and won after 5 and a half years. I love these stories and what I enjoyed reading about this couple is how they are real about the issue of debt and they took action. $30,000 in credit card debt can seem overwhelming and this couple shares tips on how they made it happen. It didn’t happen overnight and they didn’t find a famous 1869 Red Stocking baseball card in the attic. What they did do is establish a goal to pay down the debt each month and establish a plan of action.

How did they do it and how can you pay off your credit cards? Many of these ideas may not seem like rocket science, but the point is they had an action plan and stuck to it.

1. They cut expenses.
2. Established a budget.
3. Identified and changed bad habits.
4. Adjusted lifestyle
5. Got a roommate
6. They moved
7. Paid down the credit cards with money saved from cutting expenses.
8. Stopped using credit cards
9. Established an emergency account
10. Setup auto bill pay.
11. Opened a new low interest credit card.
12. Communicated with friends and family that they were going to cut expenses.

The Dunleavey’s worked hard to pay down the credit card debt including overtime at work, taking on freelance jobs, and cutting expenses. They also got extreme with household expenses. Many people that I talk with could never get rid of a cell phone, cable tv, or internet. They also cut out gym membership and stopped eating out. What this did give them was an additional $500 a month to pay towards the credit card debt. What I also enjoyed reading about this couple was that they discussed the action plan to pay down debt with friends and family. Instead of saying no to a dinner out or a gift exchange, you could discuss your families determination to get out of debt.

Do you have a success story for getting out of credit card debt? Did you take on an additional job, sell something on ebay, or cut expenses? Or maybe you were fortunate to find that 1869 Red Stocking baseball card and all your credit card worries are gone.

You can read more about MP Dunleavey at MSN or

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2008 Tax Donation Ideas To Help Your Wallet and Those Less Fortunate

Scott — Mon, 29 Dec 2008 03:17:06 +0000

photo credit: turtlemom4bacon

We only have a few days left in 2008 and I have been busy collecting some items around the house that we can donate to Goodwill and the Salvation Army. Kids clothes, sports equipment, books, and some unused toys will be given to charity this year. Does your family donate unused items and take advantage of the tax write off for 2008? Some other ideas to help those less fortunate or struggling to make ends meet this holiday season can take a little more creativity. If cash is tight in your household, as it is for many this holiday season, what else can you do? If you are like me, you might have a few thousand mileage points from an airline that you are not using. Did you know that you can donate those miles to charity? Yes, many families could benefit from donating air miles as they can be used for Make a Wish Foundation or The Red Cross and hundreds of other charities. If you have unused United Airlines miles, Delta miles, or Southwest miles, you could donate and help families across the country.

Maybe you were one of the select few who had positive returns on your stocks in 2008. You can donate stock and pass the gains to a charity of your choice. You get the tax write off and the charity gets the stock.

Do you have any creative ideas for donations in 2008? Does your family, especially your children get involved in donating used toys or clothing?

Some helpful links for more info on tax write offs and donations for 2008
IRS.gov
Salvation Army
Goodwill

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The Passive Dad » Debt Elimination Strategies

Overthrow the Credit Card woes

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