When You Don’t Want to Be Making More Money

Having a child was one of the best decisions we ever made.  Seeing our son go from sitting up to crawling to walking to running and now parroting everything he hears (gotta watch what I say now!) has been a joy and a privilege to be a part of.  Raising a child has its ups and downs, but there is no sweeter challenge in my opinion.

Old Faithful

Through all the highs and lows of trying to corral the little guy long enough to shove some food down his throat, there is one thing that has always been there through thick and thin.  My wife, of course, but also our emergency fund.  While many people complain that you just can’t make any money in a savings account in today’s low interest environment, I would argue that having adequate emergency savings has allowed our family to avoid getting into credit card debt, which is huge.

Credit card debt is something we never plan to take on (have you read this article people?!), and it is our emergency fund that ensures this doesn’t happen.  I give the example of our son earlier, because we needed the emergency fund right when he came into the world.

Born to be Expensive

When you become pregnant, the doctor gives you an expected delivery date.  This is based on millennia of evidence that kids are usually formed in the womb and then released in about 9 months.  In our experience, however, consider the delivery date as a guideline, because that’s exactly what my son considered it when he decided to come out early.

He was slated to arrive in early January, an assessment that the doctor was “fairly confident” in.  Our son was fairly confident that wasn’t going to happen and decided he wanted out 2 weeks earlier.  Coming out a little earlier is fairly common, so what does the emergency fund have to so with it?  I planned to use 2013 FSA money (mistake #1) to pay for all the hospital costs, which were many.  Since he wanted to be born in 2012, that was no longer a possibility.  And since we didn’t really budget for the costs (mistake #2), we had to get the money from somewhere.

E-Fund to the Rescue

Luckily, ever since I got my first job I began socking away a portion of my income into a savings account every month.  Once I became an optometrist, this amount increased accordingly.  So we had a nice amount saved up and hadn’t touched it for a while.  All it took was a simple transfer from my savings account to my checking account.  No worries where the money would be coming from, no working extra to scrounge up the money, and more importantly, no going into credit card debt like most people end up doing.

Many people balk at having healthy a healthy emergency fund, or an emergency fund at all, because of the opportunity cost involved.  That is, money which is earning very little interest in an emergency fund could be earning much more money if invested in the stock market or in real estate.  This is most likely true, but it’s off point because the purpose of your emergency fund is to give you the ability to pull out money quickly when needed, which investing in the stock market or real estate will not allow (except a Roth IRA, which is just one of the reasons why it is awesome).  Having the ability to draw cash in a short amount of time should be a cornerstone of any financial plan, no matter what type of investor you are.

My emergency fund has saved my skin a bunch of times, and I would imagine it will keep doing so.  Unless you’re independently wealthy and have gobs of money just laying around, having a well stocked emergency fund will give you piece of mind and keep you out of the red.


The Best Retirement Account for Young People

Dude.  Check out this new HSA I got.

Dude. Check out this new HSA I got.

When I graduated optometry school and was finally making real honest to goodness money, I didn’t really know what to do with it.  I knew I should save some for a rainy day, so I did that while paying off my student loans.  I wasn’t even doing that efficiently until I learned the Avalanche method.  I decided to start reading up on investing and money management in general, and eventually got my 401k funded, maxed out a Roth IRA and even started a 529 plan for my son.  Let me just pat myself on the back real fast.

But the account that I think has the most bang for the buck, especially for young people just out of school, is the Health Savings Account, or HSA.  I have written before about how great the HSA is, but over time I’ve come to realize that it’s not just a great account for most people, but it is an amazing, and dare I say “must have” account for young people especially.  That’s because it can serve as an emergency fund for short term healthcare expenses and also act as a retirement account.

A Versatile Account

HSA’s aren’t usually advertised as retirement accounts.  They are shown to be a benefit that comes with signing up for a High Deductible Health Plan (HDHP).  These plans usually have high deductibles and low monthly premiums, so you end up paying for your care out of pocket, but you pay less every month for the plan.  The HSA is there to set aside some money ($6,660 is the limit for families for 2015) pre-tax that will help you pay for those out of pocket costs.  This can serve as a kind of personal healthcare emergency fund, which you can use to augment your regular emergency fund sitting in your savings account.

While this is a great benefit in itself, it starts getting more interesting for the following 2 reasons:

  • Many HSA providers give you the option to choose investments.  These range from ultra conservative money market funds to aggressive stock funds.
  • Any type of non healthcare related expense that you use an HSA distribution for before the age of 65 will be taxed and you will have to pay a penalty.  But after 65, any type distribution can be taken penalty free.

Having investment choices and penalty free distributions after 65 makes this account almost exactly like a Traditional IRA.  But why is this a good thing for young people?  It’s because, for the most part, young people are healthy and don’t spend much on healthcare.  If you’re someone who is in relatively good health and doesn’t spend much on healthcare throughout the year, then the HSA is a fantastic choice.  You can leave the money in the account to grow from a young age, and when you get to be 65, you can start withdrawing the money for any type of retirement expense.  Along the way, you can always tap the money for any large healthcare expenses that come up.

Final Thoughts

For people like this, my advice is as follows:  Open an HSA as soon as you are able.  Contribute the maximum amount every year since this will help you save money on taxes.  If your provider has investment options, simply choose an aggressive fund with low fees and let it ride, changing to less aggressive funds as 65 gets closer.  Any small healthcare expenses can be paid out of your own pocket (with a credit card that earns rewards of course).  You may have to tap the account for any large expenses, but ithat’s okay since that what the account is for anyway!

This is a fairly simple strategy that can provide great diversification among your accounts.  If you are a young person with few healthcare costs, you will be doing your future self a great favor by signing up for an HSA and using it the right way.


How Your Credit Score Can Affect Auto Insurance Rates


Save 15% or more with a great credit score

There are all sorts of myths and ideas out there about what exactly affects car insurance rates.  There are the obvious things like income, history of speeding tickets and how long you have been driving.  There are also those seemingly unrelated things like the color of your car, where you went to college and who your favorite sports team is.  I made that last one up but I could see how being a New York Knicks fan could make me an angry and distracted driver.

Because state insurance laws vary and insurance companies don’t really reveal how they come up with rates, it’s hard to find out what exactly matters.  But there is one factor that plays a role in how much you will pay for auto insurance, and that is your credit history.  Yes, your auto insurance company cares if you pay your credit card bills on time.

“Credit Based Insurance Score”

According to the National Association of Insurance Commissioners, auto insurance companies use a something called a credit based insurance score as a factor in deciding how much to charge an individual for car insurance.  Because insurance companies are run by vampires who hide in the shadows, it is not known what exactly goes into this score and how much it can affect your insurance rate, but it is safe to assume that your FICO credit score is a big factor.

Now what in the world does your credit score have to do with driving a car?  One can only guess as to why exactly insurance companies value your credit score, but any factor that affects insurance rates usually comes down to one thing: money.  As in the insurance company wants to make as much money as possible while giving you as little as possible.  If you look at it from the insurance companies perspective, a perfect customer is one who pays their bill on time every month and never files a claim.  You could then come to the conclusion that someone who has poor credit is not “responsible” so they will be late on paying their bills and likely be a reckless driver.  It sounds a little far fetched, but insurance companies do lots and lots of research and it’s reasonable to think they have found some research that shows drivers with poor credit make more claims than those with good credit.

Is it unfair?

Some argue that taking into account someone’s credit score to determine auto insurance rates is unfair.  I agree somewhat, because there are many reasons that someone could have poor credit that have nothing to do with irresponsibility or recklessness.  People with egregious medical bills that have no way to pay them are just one example.  Another example is someone who has been a victim of fraud and has had their credit dinged in the process.

Immigrants are also affected unfairly by this.  They usually have little to no credit history when entering the country, so even if they are the most responsible person in the universe, having insufficient credit history can affect them.  Indeed, there are some states (Massachusetts, Hawaii and California) that have banned auto insurance companies from using a credit based insurance score.  So there is some sentiment out there which feels this is an unfair practice, but most states do allow it so I don’t see it going away anytime soon.

Bottom line

If you live in a state which allows this practice, you need to make sure your credit score is pristine.  There are many many reasons to have a great credit score, and this is just one more reason to add to the list.  Having a good credit score gives you a chance to have lower auto insurance rates, an expense every driver will have for the rest of their lives.  Even a savings of $10 a month can have a profound effect on how much you spend on auto insurance over a lifetime.  So do what you can to keep that credit score high because it can help you in more ways than one.


Why the Target Prepaid Card is Awesome

Some red cards.  But not THE red card.

Some red cards. But not THE red card.

I usually try to stay away from any type of store credit or debit cards.  Even though they offer some decent discounts, they wed you to one store which may not have the best deals all the time.  But all that changed when I laid my eyes on the relatively new Target Prepaid Card.  Just to clear up any confusion, Target has 3 separate products which are all called Redcard: a credit card, a debit card and the new prepaid card which is what this post is about.

As a brief introduction, the Target Prepaid card is basically what it sounds like: a prepaid card you load at Target and use everywhere else.  When you load it up with money, you can use it anywhere and for anything, but if you use it at Target you get a 5% discount off your purchases along with free shipping.  Not bad.  But it gets much better:

Disclaimer 1:  None of these links are affiliate links.  I don’t even know if there are affiliate links for this.  This post just describes my personal experience with the card.

Disclaimer 2:  The card is currently available in a few states.  Check here to find out where you can get one.

Once you find the card at a participating store, you have to register it online and wait for your actual card in the mail.  Once it arrives, the fun begins.  Here is what you can do with the Target Prepaid Card in two easy steps:

Step One:  Load the card

Most prepaid cards only allow you to load with cash.  But with the Target Prepaid Card, you can go to Target and load with cash, debit or credit.  That’s right.  You can use a CREDIT CARD to load your prepaid card.  This is not a mistake and is virtually unheard of in the prepaid card world.  There are so many possibilities as you can use a cash back card to get some cash from the load, or load it with a card you are using to get a sign up bonus.  There’s a load limit of $5000/month so you can’t go TOO crazy.  But you can go a little crazy.

Step Two: Unload the card

Target would love for you to load the card and spend money at its store.  After all you get 5% off every purchase.  This is what I do to some extent since I buy my son’s diapers and other various baby stuff from Target anyway.  I’ll take that 5% off thank you very much.

But what if you don’t shop at Target?  What do you do with the rest of the money?  It’s simple.  I recommend one of two things to easily unload your card:

-Use the bill pay feature of the card to pay off your credit card bill online.

-Link your checking account and transfer the money

And that’s all there is to it.  You can get some easy sign up bonuses every month with this card.  For anyone starting off in the world of manufactured spending, this is a nice and lucrative place to start.


Credit Card Churning and a Free Credit Score

Know the score

Know the score

I love samurai movies.  My favorite movie of ALL TIME is The Last Samurai.  I also love the classics like Seven Samurai.  I also really enjoy the fantasy genre.  I can’t tell you how many times I have watched Lord of the Rings and how many times I will continue to watch it.  I also really enjoy martial arts.  I have dabbled in Aikido, Taekwondo and Muay Thai, and my ultimate goal in life is to become a full time martial artist.  I greatly admire Bruce Lee and his work ethic.

So why am I giving you all the proof you need to call me a nerd?  That’s because it helps me break down things in life into a battle of good against evil.  It makes really dull subjects sound pretty darn epic.  I previously wrote about how inflation is a beast and you need to slay it.  I’ve also written about the monstrous nature of student loans and the need to keep attacking them.  Noticing a pattern?

The next beast I would like to attack is credit cards.  But this is not just simple attacking and killing it by not getting into credit card debt.  We are actually going to take this beast and make it our pet, turning it into an easy source of tax free income year after year.  How do we accomplish such sorcery?  Through credit card churning of course.

Battle plan

It is said that the battle is won even before the first strike.  This usually means that victory goes to the most prepared.  When it comes to credit card churning, I couldn’t agree more.  We want credit cards to work for us, but the fact is that most people end up working for credit cards.  This is not an easy task but all it takes is a good battle plan and good execution.

For the uninitiated, many credit card companies offer sign up bonuses with their most popular cards.  For example, one of my favorite credit cards is the Chase Ink Plus.  It gives you 5 points for every dollar spent on TV/internet bills and purchases at office supply stores.  This is a decent percentage of my monthly expenses, so it helps me to use it every month.  But the key point is the sign up bonus.  Currently, Chase is offering 50,000 Ultimate Reward points for signing up for this card and spending $5,000 in 3 months.  That seems like a lot, but it comes out to spending $1,666.67 a month for 3 months.  Some people spend that much in a week.

50,000 Ultimate Reward points translates into $500 cash back at the minimum, and can save you even more if redeemed for travel.  To keep things simple, let’s assume we’re only using the points for cash back, as redeeming for travel presents a whole other realm of possibilities.  So in essence, you got $500 for doing your normal spending.  Not a bad deal.  Now find another credit card with a sign up bonus and repeat.  This is what credit card churning essentially is.  It sounds like a dangerous game, and it really can be if you’re not careful.  But if you follow just two rules, you’ll be be able to turn this dangerous beast into your little pet puppy:

1.  Know your Credit Score

This is the most important weapon to have in your utility belt.  Having a GREAT credit score will almost ensure your approval for many of the awesome sign up bonuses out there.  Having a poor credit score will keep you out of the credit card rewards game entirely.  There are a number of factors that help in increasing your credit score, but one of the most important things is to be able to monitor your score.  You can get your score from the FICO website for $20 a pop, but that can get to be a little pricey if you want to check your score every month or so.

Credit Sesame allows you to access your free credit score anytime.  I have been using it for a couple of years and it works great.  It uses some demographic that you provide to get your score.  While it is not an “official” score, it is almost exactly the same as my real score.

I’m a skeptical person by nature, because I know companies offer sales or “free” products in order to make some money for themselves.  So what’s the catch?  The catch, if you could call it that, is that Credit Sesame makes its money by suggesting certain credit cards or accounts that may benefit you based on your information.  You certainly don’t have to accept those offers, and even if you don’t, the credit score is always free.  Pretty simple business model.


Credit card debt is one of the worst things in the world.  Credit cards charge very high interest rates and you usually have nothing to show for the debt except clothes and electronics that go stale in a few weeks.  Don’t start spending more than usual and get into debt because of it.  If you don’t want the pet dragon to turn against you, you would be wise to remember this.  Just do what you’re comfortable with.  If you only want to do one sign up bonus every 4 months, that’s fine.  If you feel confident in hitting sign up bonuses for 6 cards every 3 months, that’s fine too.  I’m somewhere in the middle, around 3 cards every 4 months or so.

Again, do what you’re comfortable with.  It’s not worth a few hundred dollars in rewards to find yourself in debt to Visa.  I find credit card churning fun, and once you start overspending, the fun is over.  That’s when you call it quits and focus on getting your spending back in order.

This post provides a very basic overview of credit card churning to get sweet, sweet sign up bonuses over and over again.  There is SO much more to the process, such as finding the best sign up bonuses and ways to meet spending requirements without actually “spending” money, but those topics will be for future posts.

Just remember to keep an eye on your credit score to make sure it’s nice and high, and absolutely do not spend more than you usually do.  With this knowledge in hand, the beast doesn’t stand a chance!  Get your credit score and get started.  Remember that you can ignore the other offers and stick to just getting your free score.

Get your free Credit Score and More


Personal Finance Perfection


I hope somebody else besides me knows who this is.

I hope somebody else besides me knows who this is.

I’ve been reading personal finance blogs for a few years now and have been writing some posts myself for about a year.  On personal finance websites you can find all sorts of guidelines and advice for almost every financial topic you can think of.  Investing, taxes, saving money on food, credit card rewards and student loans are just a few of those topics.  Reading, and implementing, these words of wisdom is enlightening and is a sure way to improve your financial life.  Most people are putting their current and future financial situation at risk, so it would be a good idea to listen to these nerdy financial bloggers whose passion is learning about money.

But how much good advice can be too much?  Reading all of this advice is great and helpful, but sometimes you can’t help but think every piece of good advice you hear is just another reminder of something you’ve been doing wrong financially.  I realize this sounds incredibly pessimistic and we shouldn’t let our past financial mistakes paralyze us, but I struggle with this myself sometimes.  There are so many different aspects of personal finance that if I’m not able to reach the zenith in each one, I feel I have fell a little short.  Here are some of the great pieces of advice most of us have come to hear about our finances:

-Max out your 401k ($17,500 is the 2014 limit)

-Max out your Roth IRA ($5,500 for 2014)

-Max out your HSA ($6,650 for 2015)

-Get full health coverage

-Get a big life insurance policy

-Get disability insurance

-Eat all of your meals at home

-Start biking to work

-Don’t turn the AC or heat on in the house

-Have at least a 20% down payment for a house

-Buy your cars with cash and make sure they’re at least 15 years old

-Ask for a raise at work every year

-Use credit cards for everything

-Get rid of your gym membership and run every day

-Don’t buy any name brand products of any kind

-Check out the local thrift store for clothes

-Keep trying to get more side income

-and many, many, MANY more!

While some of these examples are a little extreme, I’m just trying to illustrate the fact that there are so many facets of personal finance we can work on, it can become overwhelming to try to chase them all and be perfect at personal finance.  If I don’t buy my cars with cash or I enjoy eating out once in a while, does that mean I have failed as the CEO of my finances?  This is a question I did struggle with at some point, and sometimes still do.  But I’ve realized there is almost no way to reach the max in all of these areas.  For example, I love using credit cards for everything so I can get rewards and keep better track of my finances.  Yet I know people who hardly ever use credit cards yet are doing just fine financially.  Does their decision not to use credit cards mean they are trying to sabotage their financial health?

I’ve come to realize that this is EXACTLY why the subject is called personal finance.  For the same genetic and social reasons that all humans don’t grow up to be the same person, everyone’s financial tendencies end up being a little different as well.  Obviously, the general idea is to spend less and earn more, but there are so many different ways to do that.  Some people love thrift stores, others don’t care for them.  Some people love spending money on new luxury cars, but they don’t care about buying the latest gadgets.  This personal finance journey we’re on is all about finding out what we value and trying to optimize that.

So while I may not be perfect in all aspects of personal finance, I know that I’m a heck of a lot better than I was 5 years ago.  And that personal improvement is what we should all really seek.


Why The US Government Should Read Personal Finance Blogs

We like blaming the government for a lot of things that go wrong in our life.  From Obamacare to yearly tax law changes, many people start thinking that the government is out to get us.  All they want is our hard earned money and those greedy bureaucrats will do anything to get it.  While I do agree that greed is the name of the game in politics, I don’t think that every law the government makes is a cohesive concentrated effort to steal money from its citizens.  That’s because the US government really has no idea what it’s doing.

After perusing any reliable financial books and/or blogs, you will come across certain themes.  Spend less than you earn, cut your expenses and save for a rainy day.  I really think the members of the Federal government need to start taking a look at the many great financial blogs out there because they are breaking every rule in the book.  According to a recent report by the Congressional Budget Office (go ahead and read the whole thing here if you have a free 5 hours), it is almost inevitable that the US is heading towards a fiscal crisis.  While the country’s deficit has gotten a little smaller since the recession in 2009, the report states that there is NO scenario that the debt will decrease in the next decade.  That sounds pretty grim.

The Big 3 Expenses

What really shocked me was reading about how the expenses of the US government are divided.  Every individual, family, company and government has expenses.  There is no way around them.  We just need to minimize them as much as we can.  But according to the report, 85 percent of the governments expenses come from only three things:  health care, Social Security and interest payments on loans.  That means only 15% of the country’s money goes to little details like keeping roads maintained and national defense.  This is mind boggling but it does remind me of a predicament that a lot of people find themselves in personally.  There are a few expenses that can really dominate, and the big ones that come to mind are mortgages, transportation (car loans, gas and maintenance) and debt.  If you’re not careful, these expenses can really bust your budget and affect how much money you really bring in.

The way to tackle this is to take a long and hard look at your biggest money suckers and find ways to decrease them.  Bought a shiny new gas guzzler that’s taking a toll on your monthly budget?  Sell it and get a more fuel efficient used model.  Bought too much house and living in a high cost of living area?  Try to downsize while moving to a lower cost of living area if possible.  Can’t get a handle on your credit card debt?  List all of your debts in order and attack the one with the highest interest rate.  There are simple fixes to all of these personal finance issues that the members of Congress would do well to apply to our government’s expense problems.  But there is a problem.

It will never work.

And that’s because the members of Congress would like to remain members of Congress.  When you and I cut an expense that’s siphoning money from our accounts, there may be a little resistance just because old habits are hard to break but we know that it will be for the good of our financial future.  It might even be unpopular with our spouse or children but we know it’s for the good of the long term financial health of the family.  Congress doesn’t think like that because they are only making decisions based on the next election cycle.  They want their constituents to vote them in office again, so proposing to make any major changes to any type of government program will result in a backlash, most likely losing them their seat in the next election.  This can be seen with the passage of the Affordable Care Act as many people are calling for the President to be impeached!

The bottom line is, the only way to make your financial situation better is to make more and spend less.  If Congress tries to make more (raise taxes) or spend less (cut Social Security), they will make millions of people angry.  Instead, they enact short term fixes year after year and “kick the can” down the road.  Unless a group of lawmakers buckle down and make the hard choices when it comes to the budget, the US is in for a tough few decades ahead.  I will forward my blog to Congress and see if that can get things going.


How Much Cash Do You Carry?

Only Floyd Mayweather should be allowed to carry cash

Only Floyd Mayweather should be allowed to carry cash

Right now I only have $10 in my wallet.  I know I’m a Broke Professional and whatnot, but I usually had more cash than that when I was an even more broke college student.  That’s because I used to pay for everything with cash, including gas, which means I had to talk with those rays of sunshine who worked inside the gas station convenience store.  Then I got my first credit card, which was a 5% gas credit card for BP, still a pretty good deal nowadays.  As soon as I got to experience the convenience of credit cards (and got a little cash back for my regular spending), it was credit cards all the way for me.

And many others are going in that direction also.  According to a recent survey at Bankrate, half of Americans surveyed carried less than $20 in their pockets (try buying a tank of gas with that).  This shows that most Americans are opting to use credit or debit cards for their purchases.  There are a number of reasons for this, but I think the biggest reason is simply convenience.  Carrying a lot of cash (and God forbid, coins), can be cumbersome.  Making a purchase of any kind is a lot easier with a credit card because you don’t have to fumble around looking for exact change (don’t you love getting stuck in line behind those people?) or find somewhere to put your coins which will end up getting lost under your car seat.  Pulling out a solid rewards earning card for all of your purchases seems like the most efficient way to buy anything nowadays.

But having lots of cash in your wallet makes you feel like a high roller.  Is there any better feeling than pulling out your wallet or your fancy money clip and seeing everyone’s eyes bulge out of their sockets as you count your cool stack of Washington’s?  Yes there is something cooler, and that is going on your smartphone and checking your budget and knowing you have more than enough to spend with your credit card.  The ability to do almost everything financially on your mobile device has really made needing cash a thing of the past.  It is also easier than ever to pay for things with your mobile device as well.  A number of big companies have apps to download where you can pay straight from your phone.  There are also companies like Square and PayPal that make it really easy to pay for services.  Companies that accept cash only are becoming more of a rarity than ever before.

Some argue, and there are even studies, that show people spend more when using credit cards than when using cash.  I would argue that the people who do this don’t have a great grasp on their financial situation.  Make no mistake, the credit card companies know that most people spend more when using credit cards and they want you to keep using their cards instead of cash.  That’s because there are many irresponsible people out there who get caught in the credit card trap and end up paying month after month of interest to the credit card companies.  Visa can continue to get rich off of those people and I will keep using credit cards for their rewards and being able to easily track my purchases.  In my case, credit cards have become such a normal thing for me that I would probably spend more if I had cash because credit card spending seems “real” to me.

There are people in both the cash and credit card camps who are sure that there way is the path to financial salvation.  The cash only camp is getting decidedly smaller over time, however, and we may be nearing an era when we will have hardly any incentive to use cash instead of credit.


Get Rewards for Buying your Stuff

I enjoy writing about credit card sign up bonuses.  And for good reason.  They’re awesome.  They allow you to get a nice pile of bonus cash (or points or miles) for buying stuff on your credit card that you normally do.  If you can get past the silly temptation to use your cards more than you need, you can easily get at least a few hundred dollars worth of rewards in a year without much effort.  Put some effort into the sign up bonus game and you can get rewards in the thousands.  But what about those times you’re not chasing a bonus?  Should you just use any card for any type of purchase?

The answer is, of course, no!  There are certain cards that are very good for certain categories and some that are good for everyday spending.  I always say there should be a reason you pull out a certain credit card for a certain purchase.  Just using a card for no reason is selling yourself short.  After a while using the best credit card for your particular purchase will become second nature.  Here are what I think are some of the best current cards to use for different categories:

(By the way, none of these are affiliate links so I don’t get any commission if you sign up for these cards.  These are my honest to goodness recommendations from the bottom of my heart).


Money spent on groceries is a huge expense for everyone so I think getting a good rewards card for groceries should be the first thing on everyone’s list.  And not just because of food.  You can buy household stuff, greeting cards and gift cards and get the same great cash back as you would on food.  My favorite card for this is the Blue Cash Preferred from American Express.  This card gives you 6% cash back on grocery store purchases on the first $6,000 you spend on groceries in a calendar year.  That’s $360 cash back for the year right there.  The card does have a $75 annual fee which eats into that, but that’s still a decent amount of cash back for making your regular purchases.  You also get 3% cash back on gas with no yearly limit which is nice as well.  If you search around on Google you should be able to find a deal with a good sign up bonus.  I got one with a $150 sign up bonus but your results may vary.


Gas is another expense that many people incur regularly, so you might as well get some cash back for it.  As I just mentioned, the Blue Cash Preferred is probably the best gas card as well since it gives you an unlimited 3% cash back on gas purchases.  The Chase Freedom gives you 5% cash back on gas, but only during certain months of the year.  This year, for example, there are 2 quarters where 5% back on gas is offered.  The Freedom is a good card to have in general so I recommend it because it gives 5% cash on other categories throughout the year as well such as movie theaters and Amazon.  It also has no annual fee so it’s a nice card to keep around to help improve your credit score over time.


Driving around the other day I came to one of those intersections that attract panhandlers.  Before pretending I dropped something on the car floor and needed 3 minutes to look for it, I noticed one of the panhandlers was on his cell phone.  An iPhone no less.  This shows how ubiquitous cell phones are in our society nowadays.  And that can come with a price tag of course.  While I haven’t really found any good personal credit cards that give cash back on wireless purchases, there is a great business credit card from Chase called Ink Cash.  It gives you 5% cash back on your wireless bill as well as your cable bill.  It gives you 5% cash back on office supply stores as well.  The card also has no annual fee.  You can currently sign up and get a $200 bonus when you spend $3,000 in 3 months.

And most people actually do qualify to get a business card.  If you dabble in something on the side or sell things on eBay or Amazon, that’s technically a business.  (Here’s a great step by step guide to a business card application from Million Mile Secrets).

Everyday spending

There are a lot of times when you have to buy things that don’t fall under a certain category.  Random stuff like parking garage fees, medications etc. crop up from time to time.  For things like these it’s best to have a good everyday spend card.  My card of choice is the Fidelity Investment Rewards card.  It gives you 2% cash back on every purchase with no annual fee.  There are some hoops to jump through to get this card which I have already written about.  But if you’re able to get it, it will serve you well.

The Fidelity card is an American Express card, which means it won’t be welcome everywhere.  In that case, an alternative card to have for everyday spending is the Barclaycard Arrival Plus card.  While this could technically be considered a travel card, if you make any type of travel purchase throughout the year (like plane tickets, rental cars etc.), this card can serve as your everyday spend card.  It gives 2 “miles” on every dollar you spend and you can use those “miles” to get rebates on your travel purchases.  It is essentially a 2% cash back card used towards your travel purchases.  It has a great sign up bonus of 40,000 miles as well.  You do need a pretty good credit score to get approved for a Barclaycard credit card, so make sure you have all that sorted out before hand.  And this card also has an annual fee of $89 after the first year so it might not be worth it for some people after a year.

For people that hardly ever travel, the next best everyday spend card will be the Capital One Quicksilver.  The one Samuel L. Jackson really wants us to get.  It gives you 1.5% cash back on everything with no annual fee.  No frills and pretty simple.

Those are my picks for best credit cards.  I have all the cards that are mentioned here and they all work very well for their intended use.  It’s always important to remember that if you’re in credit card debt or would like to get into it sometime soon, reward cards are not for you.  You first need to not incur debt and then possibly switch to a low interest card via a balance transfer.  Most reward cards have very high interest rates so you don’t want to get into debt with those.  And remember to keep an eye on your credit score.  A great credit score will not only allow you to sign up for these great cards, but will give you the best interest rates for any type of loan you may have to take in the future.


The Infinite Monthly Payment Loop


This is how monthly payments look in space.

I’ve been told there was once a time where people actually paid for things up front and in full.  Cars, houses, education and such were paid for with cash and then utilized to the best of the person’s ability.  A person or persons simply saved up the money required for a car, for example, paid for it in cash and drove it off the lot, knowing that it is now theirs to take care of with no extra payments to speak of.  I don’t know if such a time ever existed or will ever exist again, but it does sound nice.

If there is one phenomenon that can be pinpointed as the sole reason of financial hardship for so many people nowadays, it is the ability to get whatever you want by paying for it monthly.  This is the prime reason that people are getting poorer and the banks are getting richer.  It seems there is always a monthly payment due for so many things, and new ones seem to crop up every few years.

Let’s take the ultimate never ending monthly payment as an example, the home mortgage.  Playing with some mortgage calculators, I wanted to find how much would be spent on a $200,000 home if the buyer had a 20% down payment and took out a 30 year loan at 4%.  A 20% down payment is the industry standard for a “recommended” down payment amount and a 4% rate on a 30 year loan is considered great in any time period.  This savvy home buyer thinks he got a deal, and in some respects he certainly did.  But according to the calculations, if he makes his minimum mortgage payments on time every month, he will end up having paid $349,991.21 at the end of the 30 year loan.  So he will end up having paid almost $150K extra for a 200K house.  Doesn’t sound like a great deal to me.

Now there are things to take into consideration such as the mortgage interest deduction and appreciation of the home, but those are very variable as not everyone always qualifies for the interest deduction and the market can go up and down.  Many people don’t even save enough for a 20% down payment and buy more house than they need, so the amount of money paid at the end of the loan can be much higher.  The bottom line is, it is in the bank’s best interest to get us caught in the seemingly infinite loop of monthly payments.  They get a steady stream of income from the home owner, while getting much richer in the process because of interest payments.  The buyer gets a house to live in, which is nice, and may or may not make some money in the process depending on market conditions.

This is not only limited to houses anymore.  Cars loans are a MAJOR profit center for banks.  They provide a continuous stream of income for loans that are 3-5 years long, which is the amount of time that many Americans trade in their cards anyway.  And since most Americans have multiple cars, you can see why the banks and the auto industry love car loans.  The other thing they love about car loans:  the buyer isn’t going to be making any money off of the car.  Houses can and usually do appreciate somewhat.  Cars almost always depreciate in value.  If there is a more one sided transaction out there that everybody does other than the car loan, I would love to hear it.

The monthly payment loop is not only firmly entrenched in the home and auto industry, but in consumer products as well.  How often do you see appliances, another guaranteed depreciating product, being advertised as affordable because of no or low interest payments for the first year?  You can get pretty much any type of appliance or electronic on a monthly payment plan, especially at those God awful places like Rent a Center, where everything is advertised only in monthly payments.  These products provide no long term financial benefit for the buyer, who usually trades them in for the latest model after a few years anyway.

And the ultimate monthly payment cycle?  Credit card debt.  If the store is not offering a product on a monthly payment plan, thank goodness Visa is giving you the option.  Just charge the amount of the appliance in full, and make monthly payments on it until it’s paid off.  Most credit cards have very high interest rates, some in the area of 20%.  Can’t think of a worse deal.  I write about how I love using credit cards and getting rewards, but this is NOT the way to be using them.  This is a way to get into financial trouble in a hurry.

Thanks to savvy marketing and unending greed, most people in our society are wired to think about money in terms of monthly payments.  If you can swing the monthly payment on the house, two cars and the new dishwasher, that means you can afford it, right?  Maybe.  But you are doing your current and future self a huge disservice by having your money tied up in products like these.  Imagine not having a $300 car payment and instead investing that money in your company’s 401k or using it to pay off debt?  That is the way to financial freedom.  It’s tough to get out of the infinite monthly payment loop, but doing so will get your finances back on track.