Credit Card Churning and a Free Credit Score

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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.

2.  DO NOT OVERSPEND

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

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Filed Under: Credit cards, Investing, Money Savers

Diamonds in the Rough Roundup 10/31/14

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It’s been a while since I was able to post a link round up so this is long overdue.  It’s been a crazy few weeks with a lot going on at work, hearing about my high school classmate passing away from leukemia and a busy time on the religious calendar as well.  I should be able to get back to my regularly scheduled posting.  Here are some great posts I read this past week:

-Relative Materialism: Redefining Need by The Broke and Beautiful Life:  Very eye opening post about how our possessions somehow seem to grow and grow as time goes on.

–Should You Wait to Tell Your Children They’re Rich by Catherine Alford:  Great post on if and when you should tell your kids how much wealth you have.

–Money Advice I Would Tell My Younger Self by Making Sense of Cents:  I’m sure we all wish we could go back in time and punch our younger selves in the face or something of that nature.  Here are some more milder pieces of advice to give your younger self.

–Overheard at the Coffee Shop by Budgets Are Sexy:  A series of funny (and not so funny) conversations overheard at the coffee shop.  Funny stuff.

–Do You Have the Right Money Mindset to Get Rich? by Financial Samurai:  Great summary about what it takes to be wealthy without trying to win the lottery.

–Open Enrollment Deserves Your Full Attention.  Here’s why by 20somethingfinance:  Open enrollment season is upon us, and it’s a time to review your benefits and make sure you’re taking full advantage of them.  If not, you’re just giving money back to your company.

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We Can’t Take It With Us

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While this blog is geared towards helping people do awesome financial things like paying off student loans early, swearing off credit card debt and investing like a boss, it is also my personal blog and I would like to share something personal that hit me hard this past weekend.

I found out that a girl I went to high school with passed away from acute myeloid leukemia just 2 months ago.  She was 31 years old, same age as me, and worked as a lawyer.  She wasn’t really a close friend of mine and I don’t know if she even remembered me since high school was 15 years ago, but learning this news really got to me because even though I only had a few interactions with her, they were very memorable.

My family and I had moved to Maryland in 1999, so I was starting at a new high school as a junior.  Being an introverted person as it is, I wasn’t exactly looking forward to the experience.  I knew it would take some time to make friends since I didn’t go out of my way to talk with people all the time.  I remember the first time we talked as clear as day.  It was Spanish class on the first day of school, and there was a little lull as the teacher had just taken attendance and was getting her lesson ready I guess.  Everyone was talking with each other about their summer breaks and other first day of school stuff.  Most of my classmates went to school together for years and everybody pretty much knew each other except me.

Surprisingly, the girl seated next to me asked if I was new and we struck up a conversation.  She told me a few things about the school and gave me the lowdown on certain teachers.  She was a senior and shared a lot of helpful information.  I can’t tell you how much that meant to me being a student in a brand new school.  It really set the tone for the rest of the year.  That was the only class we had together and seniors didn’t go to class to much so I didn’t really see her too often, but anytime we would see each other in the hallway she would always smile and ask how I was doing and if I needed anything.  We didn’t really talk outside of school so we didn’t keep in touch after high school.  I remember her saying she wanted to be a lawyer so I’m glad she was able to reach her goal.

We all lose family or friends at some point.  For some reason, when I hear about someone young passing away, especially someone I have met before, it really hits me.  It shows the almost unfair finality and fragility of life.  It really touched me hearing about her death because of how nice and genuine she was.  Maybe if I got to know her better or made an effort to keep in touch I would have been able to have even more fond memories?  Perhaps I could have had an opportunity to help her just as she helped me?  All these questions run through my head, but thinking on this I feel I have learned a few things from this incident:

-It’s probably one of the biggest cliches out there, but live life to its fullest.  My friend was able to get her dream job and helped a lot of people along the way by setting up various charities.  Reading a little bit about her life and her altruistic nature made it more clear that she helped me out of the goodness of her heart.  But it can all end all too quick.  One of my good friend’s older brother died in a motorcycle accident.  A guy I knew in high school was killed in a car accident on a suburban side street.  One of my former co-workers was shot and killed for a few dollars in his wallet.  And now my high school classmate died from leukemia.  It can all be taken away so fast.

–Don’t sweat the little bumps in the road.  Just like we shouldn’t be freaking out or getting depressed about daily fluctuations of the stock market, we shouldn’t let the fluctuations of life get to us and deter us from our goals.  Plan for the long term and take the little things in stride, learning from them and becoming better people.  How many seemingly terrible things have happened to us in the past where we can look back on them and see they didn’t harm us all that much and we may have even gotten better from experiencing them.

–Always do good and speak good.  The Golden Rule is what comes to mind here.  I was a new student and my friend reached out and lent me a helping hand.  I appreciated that and I know that if I’m in a similar position to help, I want to help someone else like that.  You might only get a few interactions with someone, so make them memorable in a good way.

–Money is great, but we can’t take it with us when we die.  My friend was a lawyer and was probably going through a lot of the same financial issues many young professionals do.  Student loans, buying a house and investing for retirement.  But once she got the diagnosis, I could imagine none of that mattered anymore.  Money is a great tool to bring more happiness and security to us and our families, but in the face of death, it is worthless just as almost everything else.  This is more of a reminder to myself than anyone else, as I can find myself getting lost in the world of credit card rewards, student loans and investing.  It’s definitely enjoyable, but it’s not what it’s all about.

–Never underestimate the happiness you can bring to others.  We go through the daily grind and lose sight of the big picture sometimes.  We all have people that are very close to us and it would be unthinkable to them if something bad happened to us.  We all have people we care about so we should try to spend even a little more time together than we usually do.  Time is the ultimate limited resource and we’re all losing it every day we are alive.  Make use of it and spend time with those who genuinely care about you.

I’m surprised that the news of my friend’s death has affected me the way it has, but I’m grateful for the chance to re-evaluate my position and focus on what’s important.  Don’t worry I’ll still be posting as usual, but I’ll try not to get lost in it all and keep my mind focused on the right things.

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Does Student Loan Debt Hurt the Economy?

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Student loan debt has the potential to wreak havoc on our finances.  It also seems to be affecting the economy as well.  Read on at Young Finances to find out the details.

 

 

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Filed Under: Student Loans

My Financial Kryptonite

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This hood ornament only cost me $20,000!

This hood ornament only cost me $20,000!

There are so many ridiculous things people buy in this world which makes them less of a person.  There are people that buy cigarettes regularly every day.  These will burn a hole in your wallet as well as your lungs.  Then there are those who get endless subscriptions to magazines they never read, costing them money every month and destroying forests in the process.  There are also the people who sit in idling cars every day to get their daily fast food fix.  This wastes gas and makes you fat and lazy.

There are many more crazy things out there that people spend money on, but there is one object of people’s affection that is my biggest financial foe.  I call it my Financial Kryptonite.  Not because my finances are like Superman, far from it.  But because I want to stay as far away from this purchase as I can because I know the destruction it will cause, not just on my current finances but on my future as well.  And that bane of my existence is:  luxury cars.

When you spend thousands of dollars on something, you want that thing to be very useful and to (hopefully) appreciate in value.  A house, for example, is such a thing.  You and your family can live in it for years and years and have lots of lasting memories.  Many people in the world don’t have a roof over their head, so if you have one, count yourself among the fortunate.  Houses can also appreciate in value over time, hopefully turning you a profit when it comes time to sell.  This, generally, makes buying a house a good investment.

This is unfortunately not true with cars.  Cars certainly are useful.  They allow people to get to work and run errands to keep their house and lives in order.  They allow you to travel to friends houses and new locales to keep life exciting and fresh.  But what they don’t usually do is appreciate in value.  As soon as you sign the contract for a new car, it IMMEDIATELY loses value because now it’s a used car.  Every mile you drive it and each piece of wear and tear will lead to a further decrease in value.  While this doesn’t sound too appealing, cars are almost a necessity for people who don’t live in cities and don’t have access to reliable public transportation.

The luxury curse

Now, are you interested in wasting EVEN MORE of your money for something to get you from Point A to Point B?  Get a luxury car.  Luxury cars are simply slightly souped up models of your every day Toyota and Nissan, and usually only souped up on appearances.  I’m not exactly a car nut (and I’m glad because that’s an insanely expensive hobby), but from some conversations with car nuts I have found out that luxury models and their corresponding mainstream models are almost exactly the same under the hood.  What you’re paying for is strictly appearances, and boy will you pay.  Here are some ways you’ll end up paying more by going with a luxury brand over a mainstream one:

–Higher sticker price.  An Internet search found that a 2014 Toyota Camry runs for about $22,000.  A 2014 Lexus RS, which is essentially the same car except shiner and more leathery, is about $36,000.  That means you’re paying $14,000 extra for shiny!

–Higher gas prices.  Many luxury car makers say you need to use premium gasoline for their cars.  While this is debatable in some circles, a gallon of premium gas is around 40 cents higher than regular.  That comes to about $5 more per tank of gas for the privilege of driving luxury.

–Higher maintenance and repairs.  While luxury cars are almost identical to their mainstream counterparts, many luxury cars use parts that will only work in luxury cars, and those parts are usually more expensive or bought through the dealer.  In any case, you will be paying more for 4 new tires on your Acura than on your Honda.  Even regular maintenance, such as an oil change, costs more with a luxury brand.  Again, paying more for the “privilege” of driving luxury.

–Higher insurance.  Car insurance companies will factor in nearly everything to determine your premium, and that includes if you drive a luxury car or not.  Luxury cars are usually more pricier, so it stands to reason that you will pay more to have them insured.  Yet another sneaky increase in cost of ownership of a luxury car.

Conclusion

The higher sticker price should scare most people away from buying a luxury brands, but knowing how much more the cost of ownership is should send everybody running for the hills.  But it doesn’t.  And that’s because the luxury car makers are marketing geniuses.  Luxury car commercials throw around words like “elegance” and “refined” to describe their cars.  This makes people feel good and will get that dopamine flowing once you sit in one for a test drive.  They play to our emotions and desire to be pampered, which keeps people coming back.  As I’ve heard from many people who have bought luxury cars themselves, once you go luxury, you don’t go back.

Now I’m not one to find joy in shaming people’s financial decisions.  While it can be fun at times,  everybody makes mistakes and everybody has purchases that they regret, myself included.  But I will make an exception for luxury car consumers.  If you consistently buy luxury car brands, you’re in need of therapy.  Your money can be used for so much good for yourself, such as paying off debt or investing for your future.  The fact that you’re risking your family’s financial future for some pieces of leather and a temporary pang of superiority shows that you have went off the deep end.  Your Lexus is exactly the same as your neighbor’s Camry, but the difference is your neighbor can afford to drive himself and his family on vacation a few times a year while you can shuffle your car to and from work to make up the price difference.

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Filed Under: Investing, Money Savers, Student Loans

Personal Finance Perfection

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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.

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Filed Under: Credit cards, Investing, Student Loans

Diamonds in the Rough Roundup 10/3/14

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It’s been a crazy fun week because my son is starting to talk finally!  He’s more like a parrot at this point but it’s so incredibly satisfying to hear him say even the smallest of words.  He’s been babbling for a while but looks like he’ll be saying real stuff in no time!  They grow so flippin fast.  Here are a few great posts I would like to share:

–4 Budgeting Mistakes (and How to Avoid Them) by Club Thrifty:  Budgeting is an essential first step to get your finances in order.  These are some good steps to not take when forming one.

–Society Makes It OK to be Broke by Eyes on the Dollar:  Should we call out people whose priorities are completely out of whack and are destroying their finances and their health?  Kim gives a personal take on this very situation.

–How Your Credit Score Affects Your Life + Credit Sesame Review by Making Sense of Cents:  Having a great credit score can make your life a lot easier and possibly save you thousands of dollars in your lifetime.  It’s a good idea to keep on top of it.

–Investment Noise and Why You Should Ignore It by The Wealth Gospel:  This is an awesome, incredible and insightful post about tuning out the noise when making investment decisions.  if you only read one post on anything, it should be this one.  It’s also a guest post written by me on The Wealth Gospel, also filled with incredible posts by Ben.

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The Only 2 Ways to Beat Inflation

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Run for your lives.

Run for your lives.

There’s a saying that goes, “If you’re not going forward, you’re going backwards.”  If you take it literally,it makes no sense at all.  I mean if you’re not going forward, you’re just staying still in one spot right?  So chill out what’s the problem!?  The problem is, that while you may be relaxing in your little spot, the REST OF THE WORLD is going forward.  Meaning that if you stay in your little spot, you are moving backwards relative to everyone else.

So now that this little lesson in perspective is over, how does this apply to your financial life?  It’s because inflation will make your money worth less (and eventually worthless) year after year if you don’t do something about it.  For some reason I think of inflation as a big, horrible beast.  This beast that just devours everything in its path with no regard for the carnage it leaves in its wake.  I would like to eventually convince you all to think of it in this way too, because if you’re not paying attention to it, inflation will eat you alive.

(Very) Short history lesson

In order to learn how to beat inflation, we have to know a little bit about it.  It’s a very deep topic with many economic theories pertaining to it, but in general, inflation is an increase in the price of goods and services over a period of time.  This is usually because of the diluting effect of pumping extra money into the economy.  More money available means that you need more money to purchase the same product over time.  This means your purchasing power decreases over time.

The long term average inflation rate in the US from 1913-2013 is 3.22%.  Let’s round it to 3% and assume this is the rate of inflation for every year for the rest of time so I can do math in my head.  That means if an apple cost $1, next year it will cost $1.03.  And it will keep going up 3% every year from there.  This also means that if you make $10,000 in one year, you will have to make $10,300 the next year just to maintain your standard of living.  This is why if you’re not moving forward, you’re actually moving backwards.

So how do we combat this beast that will destroy our finances?  There are only two ways available:  Make more money, or spend less money.

Making more money

This seems like an obvious bit of advice but there are many ways to diversify this.  Here are some down and dirty ways to beat the inflation monster by making more money:

Work more.  A no-brainer here.  If you’re able to work some extra days or take on some extra clients without degrading your quality of life TOO much, you can beat inflation this way.  Just working an extra day per month should be able to accomplish this.  Now of course you can’t continue to work an extra day year after year because you’ll run out of days and your spouse and kids will hate you.  So you need to find some other ways to increase your income.

Work FOR more.  Increasing the rate you get paid, by either asking for a raise or increasing your business rates is probably the best way to beat inflation when it comes to making more money.  This is because any increase on top of that will get you even more ahead of inflation!  For example, if you’re able to increase your salary by 5% each year, not only will you beat inflation every year, but each 5% increase will be compounded on top of the previous one.  So if you were able to get a 5% increase for your $10K salary, you will now make $10,500.  Another 5% increase will net you even more because it will be based on the $10,500 figure.  So your next 5% increase will get you to $11,025.  Eventually, you will leave inflation in the dust.

Getting a 5% raise every year is pretty difficult, but you should always be trying to get the highest raise you can whenever the opportunity presents itself.

Increase your investments.  Inflation needs to be battled not just year to year, but decade to decade.  Things will cost a lot more in 20 years than they do now, so you have to plan for that as well.  You can do this by increasing your contributions to your investment accounts.  If you invest wisely in the stock market with index funds you should be looking at a conservative 5-6% return on investment every year.  This will easily beat inflation, so increasing your investment contributions will increase your net worth and help ensure that you will have enough money down the road.

Spending less money

Being able to keep more of your hard earned money is another way to fight back inflation.  Using those savings to increase your investment contributions can provide a nice double whammy as well.

Frugality.  Saving money is awesome.  There are no two ways about it.  It is said that a dollar saved is a dollar earned, but remember that we get taxed TWICE when we buy stuff (first income tax and then sales tax), so saving a dollar will actually save you a little more than a dollar.  It’s important to take a detailed and thorough look at your expenses every so often and see where you can shave off some money.  Reconsider your “necessities”, because a lot of them are just wants.

It’s also important to note that if you can cut your expenses down comfortably by 10% and can keep them around the same level for most of your life, those savings will help you for a lifetime.  By being able to live on less, you are giving inflation a sucker punch that it will not recover from.

Pay less taxes.  Uncle Sam wants his fair share for every dollar we earn.  And for good reason.  There is a country to run and it takes money to run a country.  The country being run WELL is a whole other issue, but the country still needs taxes to function.  But just like we do with our real uncles, we can play some games here.  Uncle Sam has allowed us to hide some of our money from him.  This is what a 401k account essentially is.  We get to set aside some money pre-tax and invest it in what we like (or what our company chooses for us).  We will have to pay taxes on this money eventually, but the hope is that in the meantime we reduce our taxable income early on and that money grows a lot before we have to eventually give our share in taxes.

You can also pay less taxes by making sure you take all of the deductions you are eligible for.  You can read up on these on your own or get your taxes done by a reputable professional.  Most online tax programs like TurboTax will do their best to make sure you get what you’re eligible for also.

There are still some steps to take even if you are wildly successful in saving money and making money.  If you make more money and end up spending it, you have done nothing to beat inflation.  If you save some money but just let it sit there in your checking account, it’s serving as a nice buffer but it can be doing so much more.  The key to bring it all together is to put your savings and extra income to good use by increasing your contributions to your emergency fund, decrease debt and increase investments.  Inflation will never know what hit it.

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Filed Under: Investing, Student Loans

Diamonds in the Rough Roundup 9/19/14

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I usually enjoy writing about the latest sports news in these posts but man I don’t enjoy doing it today.  Very tough few weeks for the NFL as one star player gets convicted of domestic abuse and another one for child abuse.  The football games were good but its stories like these that seem to dominate the airwaves.  Hopefully players will be on their best behavior going forward so we can actually concentrate on the games themselves.

Hope everyone at FinCon has a great time.  I wasn’t planning on going this year but I’m looking forward to going next year hopefully.  Have a great weekend everybody.

–Pay Down Debt or Invest?  Implement FS-DAIR by Financial Samurai:  The decision to pay off debt versus investing is usually a difficult one with many factors involved.  This post provides a good rule of thumb for anyone having trouble deciding.

–The 4% Rule Examined by Dividend Mantra:  The 4% “safe” withdrawal rule is treated as gospel in some circles, but does have some drawbacks.

–6 Ways to Be More Frugal and Save Thousands by Making Sense of Cents:  Being frugal in one aspect of your life will help but not a huge amount.  It’s when you’re frugal in many things, especially big ticket things, that the savings can really add up.

–Why the Debt Snowball wasn’t for me by Student Debt Survivor:  Deciding between the debt snowball or avalanche payoff method can be a big decision, especially if you have large amounts of debt.  From a purely numbers perspective, the avalanche method is the best but sometimes debt payoff can be more than just numbers.

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Football and Your Finances

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catching football

Well it was inevitable.  Given my love for football and personal finance, I have written up some similarities I’ve noticed between the two.  I’m surprised it took so long actually.  I always thought that sports really transcend what you’re actually seeing on the field and that there are some life lessons to be had if you really look into them (Check out what running and soccer can teach you about your finances).  Football especially has these characteristics as each game is a blend of athleticism, history, philosophy and art.  Non sports fans probably think I’m crazy, but it’s there trust me.  You just don’t see it.

There are lots of lessons to be learned financially if we give a critical eye to football.  Football is a pretty unique sport in that it is only really played in North America and has a rabid following at the high school, college and professional levels.  It can also help you get your finances into shape if you really pay attention to the game.  I specifically enjoy watching the NFL and, videotaped displays of domestic violence notwithstanding, it has been a fun week of football as usual.  It would have been better if the Giants could actually win a season opening game, but there are still many games to be played.  Without further ado, here is what football can teach you about your finances:

Think Long Term

If there is one thing that nearly all the Super Bowl champions have in common, it’s that they took a look at the big picture to get where they are.  Football is the ultimate team sport, and it takes a combination of shrewd moves on the part of management and hard work and dedication on the part of the players to make a championship team.  This means you have to hire the right personnel, draft the right players and make sure they stay motivated.  This takes years of implementing a plan and executing it to its perfection.  Football is one sport where you can’t just sign a star player or two and expect to have success.  Teams have tried this in the past and fell flat on their faces (ahem Washington Redskins).

Thinking long term is important for your finances as well.  It is actually essential for your finances.  Your short term savings, retirement planning, college investments and income potential all need to be in order to have success.  This takes time and can not be fixed overnight.  While there can be emergencies that crop up such as emergency medical bills and job loss, those are usually temporary and if you have your long term financial picture in mind, you should have enough savings to weather the storm.  One great way to measure your financial success is to track your net worth.  If your net worth is going up over time, you’re generally doing well.  If not, changes need to be made.

Diversify!

Football has has 3 main phases:  offense, defense and special teams.  To define them simply, offense is in charge of scoring points, defense is in charge of stopping the opponent from scoring points and special teams scores some points but mainly tries to put the offense and defense in a good position.  Most teams that have continued success do well in all 3 phases.  There are some teams that have won the championship by having one overly dominant aspect, but that usually doesn’t last.  NFL coaches and players are too smart and work too hard to be fooled by the same thing every time.  In order to be successful in football, you need to keep the other team on their toes all the time by having a good offense and defense.  Being well balanced also allows you to overcome injuries.  If a team only relies on offense and has a poor defense, an injury to their star quarterback will all but spell their doom.

Diversification is needed for success in personal finance as well.  Diversification is usually talked about in the sphere of investing because putting all your eggs in one investment basket can be a very risky venture.  This is most definitely an important point to remember, but diversification can also apply to your personal finances as a whole.  I like to think of your income as your offense, expenses as your defense and investments as special teams.  Most people get the majority of their income from their day job, which is great if you have a great paying and stable job that will be around forever.  But if you are at a risk for job loss, which everyone is to some degree, it’s important to have other diverse streams of income.  This can be in the form of a side business.  While it may not net you as much as your day job, it is still something to expand upon in case you do suffer a job loss.  Keeping expenses low is also important because if you spend as much as you earn, you’re not going anywhere.  So just like football, income, expenses and investments must all be in good shape.

Plan for the worst

One thing that is unfortunately ever present in the game of football is injuries.  Football is a brutal game, with huge athletic men running into each other at full speed.  No amount of pads or protection can fully protect the players from damage.  Injuries will happen and need to be factored into the long term plan for any team.  This means that you need great reserve players who know their assigned role and will be able to fulfill it.  These reserves need to be found ahead of time because teams will be hard pressed to find a quality emergency player just sitting around and waiting.

This couldn’t be more true in the world of personal finance.  Finances can be brutal at times as well, and bills can come fast and hit hard.  This highlights the importance of having short term money in reserve.  Call it an emergency fund, tranquility fund or whatever you want, the name doesn’t matter.  What matters is that you need a stash of money that you can access in a pinch, because emergencies happen to everyone at some point.  You just have to be ready for them.  It can be the difference between paying an unexpected medical bill and not losing a beat to having to get into credit card debt and set yourself back for years.

I firmly believe that there are life lessons to be found in almost anything, but especially so in football.  If you’re not a football fan now after reading this, then I can’t help you anymore.  And if you want a team to start rooting for, pick the New York Giants.

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