Free Credit Report - Get Yours!

Has everyone taken advantage of the Free Annual Credit Report? I hope so. Not only does this report give you a good indication of how your credit shapes up, it also gives you the opportunity to have errors removed.

When I checked my credit report last year I found a $79 bad debt that didn't belong to me. I had no idea who this company was nor what they sold, much less had a debt with them.

The cool thing about checking your credit online is that some of the reporting bureaus (I know TransUnion will) allow you to contest a charge right there online while you are looking at your credit report.

It comes in handy. I just clicked the "Request Investigation" or whatever it was called and filled out the form that followed. Within about 2 months the debt had been removed. Evidently the company had no evidence that it was my debt.

I'm sure it's not always this easy to fix errors on your credit report, but TransUnion does at least require the company reporting the debt to have supporting documentation to prove the debt is yours.

How cool is that! Someone who makes an effort to protect you (instead of the big companies) is rare now-a-days.

I recommend that you stagger your requests for your credit report with each agency. First, request a report from TransUnion, wait 3 months and request a report from Experian, then wait 3 more months to request the report from Equifax.

This way you will be checking your credit 3 times a year, which makes it less likely that an error will stay on your report long enough to do much damage. And, you won't be paying a credit monitoring company to keep track for you.

Refinance to pay off Credit Card Debt - No Way!

There's always been so much talk about using a cash-out refinance to pay off credit card debt. I've always believed that this was a Bad Idea. But with Christmas right around the corner the temptation to do this is even stronger, and refinancing to pay off credit card debt after Christmas is an even Bigger Bad Idea.

Why? Because...

• you will charge more for Christmas knowing that the debt will be consolidated (you tell yourself that with a cash-out refinance the credit card debt is paid off. But it's still there - added to your mortgage)


• you will actually pay just as much, if not more, for the credit card debt - even if you refinance at a lower interest rate - because you will take longer to pay it off (Home Equity is your nest egg...)


• credit card debt is unsecured. If you default on your credit cards (don't pay them) creditors can hound you, but they can't foreclose on your home. If you move that debt into your mortgage you are securing the debt, and if you default the mortgage company will take your home (cash-out refinancing).


• a cash-out refinance costs money (loan origination, closing costs, etc). If you can come up with cash to refinance, why not use that toward your debt? If you can't come up with cash, are you going to add the closing costs to the loan? If so, you are adding debt onto your debt to pay off your debt. (Sounds rediculous, doesn't it.)


• home equity is your nest egg. It's your security during a time - your retirement - when you have little or no ability to create income. Find other ways to pay for the things you want now (like Christmas gifts), while you are young and strong and able to make money.
  


• if you cash out more than 80% of your homes value, you will pay PMI (private mortgage insurance). PMI will offset the savings you hoped to gain by refinancing (Understanding cash-out...).


• if you have substantial credit card debt, you are more than likely NOT managing your money well. Do you really think that paying off your credit card debt will stop you from charging again? If you are considering a cash-out refinance because you want to spend more than you have for Christmas, you will more than likely end up with new credit card debt - and be in far worse shape than you are right now!
  

Using a cash-out refinance is Bad Idea. Using a cash-out refinance to pay for Christmas is an even Bigger Bad Idea. Don't you agree.

Don't use Credit Cards - or should I?

I have a dilemma.

For over a year, I scrimped, sacrificed, and did without in order to pay off my credit card debt. I am now debt free.

The next logical step is to cut up all my credit cards (I've already cut up most of them), and stop using credit, right?

Well, this is where I have the dilemma. I have 2 credit cards that give cash back, and I'm torn about whether I should continue to use them for everyday purchases.

On the one hand it seems silly to NOT get the cash back on items I am going to buy anyway. Why not get a discount on necessities, if you can? Isn't that the frugal mantra?

Isn't the definition of frugal money management paying as little money as possible to meet your needs?

When I used these cards, I deducted the charges in my check register and always paid the balance off by (or before) it's due date. So, it's not like I was charging purchases, just making the minimum payment, and incurring interest. I spent quite a bit of time making sure the charges were accurate, and paid on time.

On the other hand, my brain repeats the mantra "credit cards are dangerous, don't use them." "Use cash," my brain (and Dave Ramsey) insists.

Now, this is a bit narrow-minded, I admit. I do tend to have a one-track mind once I make a decision about something. But, there is a valid point here.

If you never use a credit card, you can never get into credit card debt. If you don't use credit cards, there is no need to worry about a mistake or oversight, no trying to jump through hoops to meet the criteria for the cash back (only certain stores qualify), no concerns about the due date changing from month to month, no temptation to charge something you don't have the money for (but it's a really great deal and you can save a lot money buying it now).

In short, if you don't charge it, you don't have to fight an entire industry that is working it's hardest to get interest and fees from you. And, you don't have to fight you-as-your-worst-enemy syndrome.

So, I'm stuck. I actually called a credit card company to re-issue cards (I had cut them up) for my account. Now, I'm wondering if I made the correct decision.

What do you think? Is the hassle and risk of using a credit card worth the cash back offer?

Credit Card Debt Paid Off - was it worth the sacrifice?

I did it! I paid off all of our credit card debt. Hooray for us! (We did the happy dance yesterday, when I sent that last payment to Bank of America.)

If you read Tweak Your Financial Goals - 1 Year Mark, you know that as of November 7 (2006), I still owed $560 on the last credit card. I figured I would have it paid off in 3 months.

I was sending approximately $185 a month to that last credit card company. Now, that might not seem like a lot of money to some folks, but when you're supporting a family of 3 on less than $20,000 ($16,700 take home) a year it's a hunk of cash to come up with every month.

If you've done the math, you can see that sending $185 a month for 3 months pays off that $560, and that was my plan. But, when I made the November payment, I was so excited about being so close to my goal that I dug even deeper to pay it off early.

I made the November payment on the 17th, and by the 27th I came up with enough money to send an additional payment. Then yesterday (December 8th) I had December's payment a week early, so I made 3 payments in about 21 days..

How did I manage to come up with $560 in less than a month? I did two things.

One, I pared our living expenses down to the bone. That meant:

• a cold house (turned the heat way down-this meant I could use some of the money I had saved for propane, because we would have more left for next year)
• no treats or snacks in the food budget (we rarely eat junk food so that part wasn't too hard, but entres of ground beef, eggs, beans, soups, or pastas was boring at times)
  
• no eating out (we don't do this often, but I even eliminated our once-in-a-blue-moon fast-food run)
• no extra principal payments on the mortgage (I usually send in additional payments to accelerate our 30 year mortgage, instead I sent that money to the credit card company)
  

Two, my partner got a part-time job at a nearby grocery store. Now, this method of coming up with extra money obviously made the biggest difference in the short run, but it was the most challenging for me.

Kim had been talking about getting a part-time job for a while, but I was against it. I felt that she was already contributing enough by working 40 hours a week at her regular job. Also, I didn't think she would find a job that would allow her to set her own hours (she wanted to work one day during each week and Saturdays).

But, she persisted. She really liked the people at the grocery store where she does our shopping, and she believed that the manager there would let her work on the two days she had available. So, I figured it was worth a try. She was right. He hired her on the spot.

The hourly wage is low, and some weeks she is only scheduled for one day, but the $50 she makes on that one day made a huge difference in our saving ability. (And, she really likes working there.)

The job doesn't cost us much. It's only 5 blocks from home, so the gas use is negligible. She packs a lunch, or comes home to eat. And, she didn't have to buy any special clothing; it's a grocery store so jeans and tennis shoes are fine.

So, that's how we did it. Lots of sacrifice and some extra work. Was it worth it? You betcha! We are Free from debt (except the mortgage), and that feels really fine!

Tweak Your Financial Goals - 1 Year Mark

After a year of working on my goals, it dawned on me that my goals had changed. Some had been accomplished, others had changed. Let's see how far I've come.

Goal #1: Create Freedom/Smart Accounts ACCOMPLISHED

SHORT-TERM GOAL: Save the minimum amount needed to pay irregular bills ACCOMPLISHED

LONG-TERM GOAL: Increase savings to upgrade coverage and provide a cushion This Goal has been suspended until after I move. At that time I will re-visit it and determine if it still fits my needs.

My Freedom (Smart Money) Accounts are at INGDirect. I keep just one account and divide them into categories in a Spreadsheet. My Categories are:

AUTO - for Auto Insurance and Tags

PROPANE - for heating gas (I have a note on the spreadsheet to remind me to fill the tank in the summer when prices are usually lower, and that tank rent is due in Oct)

SEASONAL - for seasonal clothes and gifts like Christmas

LIFE INSURANCE - obviously for life insurance premiums


I had several more categories in my Freedom Accounts, but found I didn't need them there. These 4 are the basic necessities.


Goal #2 Create an Emergency Fund

SHORT-TERM GOAL: Save $1000 ACCOMPLISHED

INTERMEDIATE-TERM GOAL: Save 3 months expenses PLUS a typical car repair, a typical home repair, and the medical insurance deductible (I added this one. I find it more reasonable than a 6 month goal when so many things in the house need to be done) ACCOMPLISHED

LONG-TERM GOAL: Save 6 months expenses PLUS enough to cover a typical car repair, a typical home repair, and the medical insurance deductible. This Goal has been suspended until after I move (see above)

I have my Emergency Fund in a Capital One Money Market Account. This account pays a little bit more than INGDirect (Cap One 4.8%, ING 4.4%) but more importantly it has check writing priviledges.

If an emergency occurs (as it did when the washer sprung a leak), I want access to the money immediately. I am more likely to need a checkbook for an emergency or a car repair than need cash, and the checks are free. This is why I chose Capital One for my Emergency Fund.

*The only down side to this account was that it was not EFT enabled (Electronic Funds Transfer). Capital One has now encorporated these accounts into their Direct Banking system, so you can withdraw funds to your checking account online, or write a check.

Goal #3 Pay Off Credit Card Debt

SHORT-TERM GOAL: Pay off smallest credit card bill ACCOMPLISHED

LONG-TERM GOAL: Pay off all credit card debt and stop using credit cards unless total can be paid each month (I have paid all but $560 credit card debt. This will be paid off in 3 months) 83% ACCOMPLISHED

Once the next to last cc debt was paid, I rolled that payment into this one. No backing off was allowed. I didn't even think of having money freed up, I just started sending it all to this last debt. It feels GREAT knowing I will have paid off $3289 in 1 year and 3 months time!

Goal #4 Contribute to Retirement Account

SHORT-TERM GOAL: Contribute at least 1% to retirement.ACCOMPLISHED

INTERMEDIATE-TERM GOAL: Increase contributions to reach employer match ACCOMPLISHED

LONG-TERM GOAL: Increase contributions to 10% - 20% This Goal has been suspended until after I move. Half-Way ACCOMPLISHED

Start with at least 1%, do more if you can and make it a goal to increase your contribution at least once a year. Roll your annual pay increase into your 401k and you won't even notice it. You will be accomplishing this goal without feeling even a pinch.

If your employer offers a match (most employers will match some portion of your 401k contribution) contribute at least enough to get the match. If you don't have a retirement account through your employer, open a Roth IRA account and contribute at least 1% of your take-home pay.

I contribute 5% to the 401k because the match cutoff is 5% (employer matches 50% of contributions, up to 5%).


Goal #5 Save for Home Improvements

SHORT-TERM GOAL: Decide on most pressing area for improvement and begin saving

LONG-TERM GOAL: Create savings sub-accounts for all improvements

If you own a house you're going to have to make improvements and repairs. All houses will need a new roof, new flooring, fresh paint, new appliances, and maintenance at some point. Saving for these things just makes sense.

Now that I've re-visited my Goals and realized they need a tweak, I've rewritten them, as follows:

New Goal #1: Pay Off Credit Card Debt

SHORT-TERM GOAL: 3 more months till all credit card debt is paid.

LONG-TERM GOAL: Stop using credit cards unless total can be paid each month ACCOMPLISHED

New Goal #2: Save just for Home Improvements needed to Sell the House

New Goal #3: Save for Down Payment and Closing Costs on a Home in the Country.

Remember: studies have shown that happiness comes from making progress on a Goal, Not on reaching that goal. So, always re-visit your goals and create new ones when you've accomplished (or suspended) the old ones. Keep a Goal of happiness and contentment a permanent part of your life.

Freedom/Smart Money Accounts

I just love Freedom Accounts. I like to refer to them as Smart Money Accounts, because it's just smart to save a little bit each payday to pay big bills that you know are coming.

I don't know why I've never thought of this before. I consider myself fairly smart when it comes to money. I've always saved money. I've always paid more than the minimum on my debts, and always on time, but for some reason, it never occured to me to set up accounts that are designed to pay large, irregular bills.

Now honestly, I consider the "money-will-just-show-up" way of paying your bills to be pretty silly - well actually, it's down-right immature - but I've used that method to pay my irregular bills for years. If you aren't familiar with the "money-will-just-show-up" method I will give you an example.

A few weeks or a month before an irregular bill (let's say it's your auto insurance) is due, you start wondering where the money will come from to pay this bill. As time grows shorter, you begin to look around for ways to pay the bill. Do I have enough in savings? Am I getting a birthday check this month (yeah right - you still get money on your birthday even though you're 45)? Will my Income tax refund show up in time?

If none of these ideas pan out, you begin looking at your credit card, and telling yourself it won't be so bad to charge it because the interest rate is pretty low on this card, or you promise yourself that you will pay it off in 2 months, TOPS.

So, either the money just 'shows up' (gifts, refunds, savings) or you charge it to your credit card and end up with interest to pay, sometimes for months. More debt and more debt!

Then I read about Freedom Accounts online and ordered the book, Cheapskate Monthly Money Makeover. Although I can't say I like Mary Hunt (in my opinion, she comes across as a money snob in her books), I have to give her credit for a good idea regarding Freedom Accounts.


Setting aside money to pay irregular bills like Auto Insurance, Car Tags and Registration, Heating oil, Seasonal Clothing, Gifts (birthdays & holidays), Life Insurance, and even Haircuts is just Smart Money Management.

To create Smart Money Accounts, you figure out how much money you need to save each pay period in order to pay these irregular bills, and send it, or have it sent, to some type of savings account. This way, the money is there when the bills come due.

To figure out how much you need to save, just divide the amount of the bill by how many paychecks you will receive in each prepayment period.

For example, let's say that your auto insurance is $320 (bill), every 6 months (prepayment period), and you get paid twice a month. So, you would divide $320 by 12 (2 paydays each month for 6 months equals 12). This comes out to $26.67 each payday (I rounded up).

Move on to the next irregular bill you have and figure out how much you will need to save from each paycheck to pay that one. Let's say this one is Heating oil. You usually spend $300 for the year and again, you get paid twice a month. Divide $300 by 24 (2 paychecks a month for 12 months equals 24). This one comes to $12.50 each payday.

Once you do this for each irregular bill you have, add up the totals. For our examples, add $26.67 plus $12.50 and you will need to save $39.17 every pay period to pay these bills.

To keep yourself from (accidently?) spending this money, it's best to have it deducted from your checking account every payday, and sent to a savings account of some type.

The internet has made it so easy to save now-a-days! You don't have to change banks, you don't have to use your lunch hour to drive to your bank to set this up. It can all be done easily and securely online.

I keep my Smart Money Accounts at ING Direct. ING makes it easy to open an account and I feel completely secure having my money there. They also pay a very decent 4.4% (APY) interest on your savings. That's way more than my regular savings account pays (which is a measly 0.5% at Bank of America right now).

You can just use your regular savings account for your Smart Money Accounts if you aren't really concerned about earning interest. And with most banks you can set up your transfers online, so you won't have to actually go to the bank to set it up.

Just set up the transfers somewhere and soon you will be worry-free when these bills show up again.

I'll Start Budgeting .... after the Holidays

We do like to procrastinate, don't we? That diet can wait till tomorrow. The exercise program will begin when it gets warmer outside. Those clothes will be mended later. And, the budget will start after the holidays.

After all, it's the HOLIDAYS! We can't be expected to discipline ourselves during the HOLIDAYS, now can we?

I understand the need to take a break. I think rewarding yourself for a job well-done is a good idea. And, I certainly agree that we must not venture too far outside our comfort zones when it comes to money ...

But ... (you knew that was coming, didn't you)

Discarding discipline during the holidays is the WORST possible time to get lax. The holidays are probably the #1 time when budgets are decimated, overspending is rampant, and money is wasted.

People are running around like chickens with their heads cut off - trying to find things to waste their money on. These spendthrifts are buying (pardon me for saying) stupid things like knick knacks, figurines, stuffed animals, cut flower arrangements, goofy ties, and fruit cakes ... things that are just going to gather dust, be given away next Christmas, or die and be thrown into the trash.

It makes me cringe when I think of all the money that is wasted during the holidays. I think of all the credit card debts that could be paid down, the mortgage payments that could be accelerated, and the savings accounts that could be fattened.

Creating a budget BEFORE and sticking with it THROUGH the holidays is probably the best thing you can do for your finances.

Have a spending plan.

Allot a certain amount of money for gifts and don't go over it.

Don't buy a turkey AND a ham, cakes, AND pies, AND candy, AND nuts, AND rolls for holiday meals (your wallet and your waistline will thank you later).

I know it's hard, but as exercise guru Tony Little used to say, "You can do itttt!"

I'll Keep the Change

Many people save their change in jars, coffee cans, etc. Carrying around a lot of coins gets heavy and bulky after a while. Personally, I rarely have change because I rarely pay with cash. I find that carrying around cash creates too much of a temptation to buy little things, like spending $1.79 for a soda at a convenience store, or $.85 for a candy bar, or $1.29 for a sausage and egg biscuit at McDonald's.

I do, however, get frustrated by trying to reconcile my bank statement to the penny. It seems like there is ALWAYS a discrepancy of 8 cents or 21 cents or some such piddlin' amount. I guess we just have poor math skills, even though we use a calculator most of the time.

So, I was pretty happy to find that our new bank has a program that will enable you to round up the things you purchase on your debit card. Bank of America has a new savings program called Keep the Change. I think it's pretty nifty.

When you sign up for Keep the Change, purchases paid for with your debit card are rounded up and the difference (the change) is sent to your savings account. And, here's the really cool part... Bank of America will match the change sent to your savings account!

For example, let's say that you need gas. So, you go to the gas station, swipe your debit card, then proceed to put $10 in your tank. You get distracted because you hear motorcycles approaching and turn to watch two Harleys pull into the station. Oops! You've put $10.03 in your tank (this is a true story). With Keep the Change this is now a good thing because you've just added to your savings account and gotten some FREE money.

Just note that the gas was $10.03 in your debit register, but deduct $11.00 from the balance in the register. It's a snap to subtract whole numbers. You are much less likely to make a mistake this way.

At the end of each day, Bank of America adds all of your change from purchases made with your debit card and transfers the total into your savings account. And Bank of America will match 5% of your total 'change' transfers.

So, suppose that after a year, you have $137.10 in change transferred to your savings account. Bank of America will add an additional $6.85 to your savings account, FREE.

For the first 3 months after you sign up for 'Keep the Change', Bank of America will match 100% of your change. So, if you've had $100.10 in change (for the first 3 months) transferred to savings, Bank of America will add another $100.10, FREE!

Now, that's my idea of a good interest rate! After the first 3 months, the match goes to 5%, but that is still a pretty good interest rate too. You can't find 5% anywhere else, even with online savings accounts.

Of course, your regular savings are not earning that 5%. Bank of America offers a piddlin' 0.5% regular interest on regular savings account deposits, but if you want the 5% it's easy to get. Just use your debit card for as many purchases as possible and you will get a 5% match.

Matched amounts are added to your savings account once a year.

My Financial Goals

After reading a dozen Financial websites and blogs, and reading four financial books, The Total Money Makeover, Financial Peace Revisited, The Automatic Millionaire, and Cheapskate Monthly Money Makeover, I've got my goals in order. I follow these goals in order, completing one before I move on to the next one (at least, that's the plan).

Goal #1: Create Freedom/Smart Accounts

SHORT-TERM GOAL: Save the minimum amount needed to pay irregular bills

LONG-TERM GOAL: Increase savings to upgrade coverage and provide a cushion

Mary Hunt suggests what she calls "Freedom Accounts". These are savings accounts you set up for bills you know are coming, they just aren't due on a monthly basis. For example, auto insurance is usually due every 6 months, life insurance: once a year, heating oil: once a year, auto registration and tags: once a year ... and so on.

I think these accounts make sense and since we aren't using credit cards anymore (right!?) this is the only way the money will be available to pay these bills. What I do is add up all the bills I know are coming and divide the totals by 6 or 12 (auto insurance divide by 6, car tags, divide by 12) to give me the monthly amount I need to save each month. This way, when they come due I have the money saved and wont need to use my credit card to pay them.

I don't like the term 'Freedom Account' because when I see it I always wonder, "freedom to do what?" It's just one of my quirks. I prefer the term 'Smart Account" because it's just smart to save the money when you know the bill has to be paid at some point.

Goal #2 Create an Emergency Fund

SHORT-TERM GOAL: Save $1000

LONG-TERM GOAL: Save 6 months expenses PLUS enough to cover a typical car repair, a typical home repair, and the medical insurance deductible

Dave Ramsey suggest having at least $1000 for emergencies before attacking your debt. I think this is a good place to start.

Goal #3 Pay Off Credit Card Debt

SHORT-TERM GOAL: Pay off smallest credit card bill

LONG-TERM GOAL: Pay off all credit card debt and stop using credit cards unless total can be paid each month

I use a combination of Dave Ramsey's debt snowball and a common-sense directed, pay down the highest interest rate first approach.

I also listen to my own emotional/psychological comfort zone to accomplish this goal. If it doesn't feel good to me, I back off on what I pay down until it does. Ignoring your comfort zone when it comes to money is a sure-fire way of getting discouraged or scared, then giving up.

PAY ATTENTION TO HOW YOU FEEL ABOUT WHAT YOU ARE DOING and adjust accordingly. Paying every spare penny toward your debt may make sense, but it wont get you anywhere if you quit because you feel too deprived or scared.

Goal #4 Contribute to Retirement Account

SHORT-TERM GOAL: Contribute at least 1% to retirement.

INTERMEDIATE-TERM GOAL: Increase contributions to reach employer match

LONG-TERM GOAL: Increase contributions to 10% - 20%

Start with at least 1%, do more if you can and make it a goal to increase your contribution at least once a year.

If your employer offers a match (most employers will match some portion of your 401k contribution) contribute at least enough to get the match. If you don't have a retirement account through your employer, open a Roth IRA account and contribute at least 1% of your take-home pay.

I contribute 5% to the 401k because the match cutoff is 5% (employer matches 50% of contributions, up to 5%).

Goal #5 Save for Home Improvements

SHORT-TERM GOAL: Decide on most pressing area for improvement and begin saving

LONG-TERM GOAL: Create savings sub-accounts for all improvements

If you own a house you're going to have to make improvements and repairs. All houses will need a new roof, new flooring, fresh paint, new appliances, and maintenance at some point. Saving for these things just makes sense.

How I got $160 FREE - part 2

So, I received $125 from Bank of America for opening a new checking and savings account. Where did I get the remaining $35? ING.

I've had an ING savings account for about a year, but I didn't notice that ING offered referral bonus' until I read this at My MoneyBlog.

The article linked above is great information for anyone thinking about opening an online high-yield savings account. Instead of trying to remember what is offered at each bank, Jonathan lays it all out for you in one place. Thank you, Jonathan!

Anyway, back to my free $35. When I was investigating what was required for the referral bonus at ING, I read - in the small print at the bottom of the page - that ING accepts joint accounts for their referrals as long as the primary account holder is a new customer.

This meant that I could open another account myself and receive both the referrer's bonus and the referred's bonus, as long as the primary onwer of the account was a new customer.

So, I opened a new account with my partner's name as primary owner and my name as joint owner, and we received the $25 for the new customer account and the $10 for the referral. $35 Free! Easy as pie!

If you are interested in opening a new ING savings account (currently 3.5% apy) and receiving a free $25 bonus, please contact me with your first and last name and email address. You could open an account in your name and receive the $25 bonus with this referral, then open a second account with your partner/spouse/friend as new customer and you as joint owner and receive another $35 Free. Potential of $60 in FREE money just for opening a great savings account earning interest far above what local banks offer!

How I got $160 FREE - part 1

I mentioned in the Debt Snowball Article that I had found some easy ways to make $160 (that I used to pay down my credit card balance). Here's how I did it.

The banks in my area are in a competition war. Well, it seems like a war, because every day something else arrives in the mail to tempt you to change banks. So far, the local county bank has offered to give away free digital cameras, free cordless screwdriver sets, and free online billpay. They also offer to buy your left over checks and debit cards from other banks (up to $25).

I was seriously considering changing to this bank, even though it was going to be a hassle. Having to order new checks, change direct deposit destination (which can take up to 3 weeks), and leaving a good relationship with the local credit union wasn't my idea of fun, but it was beginning to look like a good deal.

As much as I like the credit union, I can't say much for their website or their hours, and the branches were a bit inconvenient to get to. I also wanted the billpay feature that the county bank was offering free. There was a $4.95 a month charge for online billpay at the credit union.

So, I was nearly convinced to change banks for the convenience of better banking hours, free online billpay, and a free screwdriver set when I received a promotional offer from Bank of America in the mail.

Bank of America was offering $100 for opening a checking account and $25 for opening a savings account. Now this was a deal! My eyeballs bulged as I read the fine print searching for restrictions or bait and switch tricks. There didn't seem to be any, but I'm suspicious of banks giving away free money, so I went to their website to sleuth out any fees or catches.

Aha! they do have fees, and none of the banks in this area have fees anymore. This wasn't looking too good until I saw that there were ways to avoid the fees. Monthly direct deposit (which we use anyway) waived the fee for the checking account and a monthly transfer to savings (or a balance of $300) waived the fee for the savings account.

Now I can't say that Bank of America has much better hours than the credit union, but they are open on Saturday for half a day, and they do offer free online billpay plus a very good website. So, I would be getting most of what I wanted plus $125. I can't turn down free money, so we now have new accounts with Bank of America and we're $125 richer!

Bank of America has a referral program in which both the referrer and the referred receive $25 if a new account is opened on a referral. If you are interested in opening a new account with Bank of America and want $25 free please contact me with your name and email address.

Debt Snowball ... You want me to do What?!

Here's my dilemma. We had some money saved, about $6000, and I knew from reading Dave Ramsey's Total Money Makeover that all but $1000 should go to our credit card debt ... but I just couldn't bring myself to do it!

I knew that we were upside down financially. I knew that we were paying much more in interest to the credit card company than we were receiving in interest from the credit union savings account, but I had an emotional/psychological block to sending most of that money to the credit card company.

That money was our safety buffer. It wasn't just money for emergencies, it was an emotional safety net. It felt like much more than it actually was. Intellectually, I knew it was just money for emergencies, but emotionally, it felt like Freedom, Safety, and Security.

Dave Ramsey's concept of debt reduction made sense to me. (Loosely paraphrased)

Put your debts in order of smallest to largest. Pay the minimums on every debt except the smallest. Pay every spare penny, excluding $1000 for an emergency fund (which meant $5000 of the $6000 we had saved) toward the smallest debt. Once that was paid off, take the payment from that one (plus every spare penny) and add it to the next smallest debt. And so on...

(end of paraphrase)


The 'Debt Snowball' was fast, effective, and designed to quickly put you back on the right track financially. It had a built-in psychological reward. Paying off the smallest debt first was quickly done, in most cases, and sure to reward you emotionally. But my emotional security zone was sending up red flags when I just thought of sending that money to the credit card company.

The emotional part of me was saying things like, "I know our debt has to be paid, but once that money is gone, it's gone. It'll take forever for us to save that much again!"

Well, I stewed about it, talked about it with my partner, searched the internet for help, and read everything I could find to help me get past the emotion of doing what was probably the right thing to do, financially. But I just couldn't.

So, what did I do? I found some easy ways to make $160 (more on how I did that here) and sent it, along with $550 of that $6000, to the credit card company.

Yeah, I cheated on the Snowball Debt reduction plan. I only took 9% of a baby step (Dave Ramsey's Baby Steps), but I am knocking out my credit card debt and keeping my emotional safety net all at the same time. No Regrets and Contentment with my decisions ... are my first priorities.

David Bach: Hype or Bait and Switch?!

I'm reading David Bach's The Automatic Millionaire. I think this book is a fun and easy read, and although I'm only about half-way through it, I had to stop and blog because I also think it's sneaky and closer to what I would call a bait and switch than it should be.

Let me explain.

The Automatic Millionaire does a really good job at pumping you up. It shows you ways to find those bits of money you are wasting and makes you feel like you can really save! This book gets you motivated and excited about 'paying yourself first', and then tells you how to save those bits of money tax-free so that you can watch it grow into a million dollars with compound interest.

Sounds great doesn't it!

OK so he's got you. That's the bait part. He has you baited on the hook ready to dive into the water and save all those bits of money tax free. Then comes the switch part of this hyped up book ... you are saving for your retirement and can't touch that money until you're 65.

NEW FLASH: The only way to save tax free is to save in a government sanctioned retirement account.

So, what's wrong with that? Well, nothings wrong with saving for retirement, but if our debt and savings problems were only about having money for retirement, don't you think people would have already been contributing to a retirement account.

Problems with debt and lack of savings are so widespread because, in most cases, people are trying to appear wealthier than they really are ... not because they just haven't thought about how much money that $3.50 daily latte can grow into if it's saved tax-free in a retirement account.

I mean, cmon, people know they need to save for retirement. But that isn't the problem (and saving for retirement isn't what was on your mind when you bought this book either).

The real problem is that people are so inundated with marketing messages that tell them they must appear as though they are affluent ... even if they aren't ... that they feel shameful, poor, and pitiful if they don't spend the money to keep up with everyone else. So they spend and spend and when their money is gone they charge and charge. Making their lives miserable with no relief in sight.

Bach does mention that many people who appear wealthy are really in debt up to their eyeballs, but he slides past this pretty quickly and goes on with his hype about how you can be a millionaire no matter how much money you are making. And you don't even need a budget to do it (more on this later).

I assume he will go on to tell you how to become debt-free, and pay off your mortgage, and save for a rainy day ... but where will you find the money for that? Since, according to Bach, budgets don't work, and you've already used all your latte and cigarette money to fund your retirement, where will the money come from?

Don't bother trying to explain (or even think) that you just can't find anymore money to save, because as Bach writes in reply to just such an assertion, "Oh, come on. Hit yourself in the head (gently) and just keep reading. What you're saying is just not true."

My point in this blog is that David Bach sells hype and misleads people with The Automatic Millionaire. He makes you think that by following his ideas, you make your life better today, and that just ain't so.

I don't want to be a Millionaire.

OK, I wouldn't mind being a millionaire, but that's not my goal. This is the point of my blog. Goals must be realistic or they will not be achieved.

How many times have you read or heard something that got you so excited and motivated that you quickly scribbled out a lofty plan and set right to work on changing your financial life ... only to realize a few weeks or months later that not only have you not reached your goal, but now you are so discouraged that you give up completely?

I think this happens fairly often, and I believe it occurs because we set our sights too high.

I know, I know. I've heard it too. "Think bigger!" "The sky is the limit." "Keep your dreams alive!" "The Universe is Abundant and you can have everything you want!"

Well, all those motivating phrases may be true, but I've found that I do much better reaching my financial goals by keeping my feet on the ground and my head out of the clouds.

Now, don't get me wrong. I enjoy reading books, websites, and articles that encourage me and lift my spirits. These are wonderful resources and I wouldn't have gotten as far as I have without them.

But, sometimes, I get discouraged when I read that the Smiths have a combined net income of $84,300 a year. Based on most of the examples used in these resources, one might get the impression that there is no hope for someone who makes under $50,000 a year.

I mean, if someone making that kind of money is having trouble paying off credit card debt and can't save money, what sort of head-way can I make when I bring home less than $25,000 a year.

At least that's what I used to think. But not anymore.

Since I've made my goals more realistic, based on my income (not some income I think I should be making) and decided on a plan to reach those goals, I see real progress.