Cashback Bonus = Christmas Budget

Posted by Debt Destroyer on October 27, 2008

If you're new here, you may want to join hundreds of other readers and subscribe to my RSS feed or my free email subscription to receive free updates. Thanks for visiting!

I know it seems early to be bringing up Christmas (especially with the economy possibly crumbling around us), but the displays are going up in stores, so I guess it’s never too early to starting thinking about it.

For the last few years we here at the Debt Defier household have been funding our Christmas shopping with our Cashback rewards from our credit cards. We both have a Discover Card and until we recently decided to start paying for a lot of items with cash, the cards were how we bought everything.

One good thing about buying everything using plastic, is that you build up a pretty decent cashback reward in no time. Of course if you don’t pay off the balance in full each month, the interest you end up paying will more than wipe out any reward you earn. So be careful.

Back in the good old days when Discover would let you turn $20 of your cashback in to a $40 giftcard this made shopping a breeze. My brother and sister would always end up with something from Borders. And my folks would get a Red Lobster certificate. And I’d be a big hit, feeling like I didn’t spend a dime.

Then I got married.

Not only did my network of people I had to buy presents for increase greatly but Mrs. Debt Defier wasn’t all that keen on giving gift cards as presents. This led to her doing most of the shopping our first couple of years as a couple. But that ended after she busted our budget on presents…BIG TIME (Like doubled it)!!

Soon she saw the light on my “Cashback Christmas” system.

By this time though Discover wasn’t nearly as generous as they used to be. Now $20 Cashback could only be turned into a $25 card. Still not a bad deal if that card is for a store you’d actually shop in, but they spoiled me with their more generous offer so now I usually just request a check and we start from there.

We also time our Target purchases so that we receive a 10% off coupon in time for the holiday season. This can be a little tricky, but it’s rather easy if you pay attention (We’ll miss out on this added benefit this year, due to our Cash experiment).

This year it looks like we’ll have $400+ to blow on crap. We’ll stretch this by giving homemade gifts to a few people, and we also usually re-gift something that we received before but never used (Yes I’ll admit it, I’m a re-gifter).

I think I’ll cut this off here before I turn this into a post asking whether or not commercialism has ruined Christmas. But I promise to revisit this idea again as we get closer to the holidays. I really just wanted to present my “Cashback Christmas” budget system to all the fine Happy Rock readers.

Of course if we stick to the cash plan, this will be the last year that we’ll have any decent amount of dough to work with. But if the economy doesn’t turn around, we’ll probably have to scale back anyways. You know what that means…

Homemade gifts for everyone!!!

So now that I’ve shown you mine, you should show me yours…holiday budget system that is. Whether you use an envelope system, buying clubs, do your shopping in July, or go crazy on the 24th, let me know how you deal with the frenzy that is Christmas Shopping?

Until next time,

-DD

» Filed Under Frugality, Giving

Credit Card Signups At Checkout - Worth it or not?

Posted by The Happy Rock on October 26, 2008

As I was in the line at Home Depot with all the supplies to redo our bathroom, I did something I haven’t done in years The seed was planted by an extremely helpful employee in the bathroom section and by the time I was about to check out with $400 worth of materials the frugal side of me couldn’t resist the 10% off savings of $40 if I signed up for a credit card.

After a short walk to the customer service desk, few tidbits of information, and about 10 minutes I had a new credit card with a $10,000 limit and $40 off my bill.

The weird part is that I felt a little dirty afterward. We spent so long digging out from under 70k in debt that it feels crappy being in unplanned debt even if we pay it off when the bill comes. It felt sort of like I cheated after going years with only one credit card.

Once I was able to separate myself from the situation, I could see that it wasn’t that big of deal and I saved $40, but the real question is “was it worth it”? I would love to hear the readers thoughts on the matter.

Here is my take :

Hassle - It took an extra ten+ minutes to check out, plus the extra stress and hassle of making sure you remember to pay the bill and cancel the card. Let’s say it took about an hour all told, $40 an hour is a pretty good return.

Risk - What risk you ask? Risk that you get late fees and penalties. Risk that you can’t afford to pay the bill when it comes. Risk that the card and company is reputable. Risk is one of the huge components of debt that people often overlook and don’t respect. It is the part of debt that has people in foreclosure, bankruptcy, or buried under piles of interest. Everyone says that it won’t happen to them, but it happens more often than people care to admit.

Card Quality - When signing up for a card at a check out counter, you give up your ability to research the card and the company. Often the ‘check out’ cards are more dubious in quality than some of the major common cards like American Express Blue Cash. ‘Check out’ cards are often willing partake in questionable practices that regular cards don’t like hidden fees, really high interest rates, fees for returns, short grace periods, etc. Turns out the Home Depot card has gotten terrible reviews in this regard.

One Drop Syndrome - Doing it once starts to break down your resistance towards debt and makes doing it again all the more appealing. Eventually and usually without knowing you are doing things with credit that you wouldn’t have pictured just months earlier.

Credit Score - This one really shouldn’t matter too much, because a good score means that you can just get into more debt which you shouldn’t be doing. A new hard pull on your credit does ding it for while and the new card may or may not effect it, but it is at least worth noting.

With all that said I really don’t think that I would do it again. I am not saying that I will never do it, but I think the amount that I will save will need to be greater than $50 or more. That’s my take.

Update - The bill is paid and the card was canceled without a problem. They did start offering me free coupons if I kept the card open, but I politely declined.

» Filed Under Credit Cards, Frugality

“The Debt Defier” meets “The Debt Defier”

Posted by Debt Destroyer on October 23, 2008

I feel silly.

I just found out that there is already someone out there blogging under the name “The Debt Defier.”

Here is her blog

She hasn’t posted anything since May. But she cold start up again at any moment since she’s already took a year long break from the blog while she was living in Thailand.

I found out about her when I googled “Debt Defier” and up popped her site. I should’ve done this a long time ago, but to tell you the truth when I got into this whole “blogging thing” I didn’t know much about it (still don’t), so it never even crossed my mind.

I feel bad using the same name as a fellow personal finance blogger (especially someone who likes The Goonies & Nina Simone). To me it’s like when people called LaDainian Tomlinson LT, when everybody knows Lawrence Taylor is LT!

Plus this blog was mentioned on NPR (click here for a listen). And I’m a huge NPR fan, so it’s settled…

I need a new name!

Actually you know what? I kinda like ending my posts “DD”. So until I have a stroke of brilliance (don’t hold your breath, it could be awhile), I think I’ll stick with that.

But feel free to throw out any ideas you have. Going by some of the names you have, it’s easy to see that the Happy Rock readers are a very creative bunch.

Until then,

-DD

The Happy Rock - Also, readers have had problems realizing that there is more than one writer at The Happy Rock. So any site changes that people could recommend that might help quickly and easily identify who is the author of a given post. My friend Ray over at Bathtub Brewery did an excellent job on this front. Any thoughts are greatly appreciated.

» Filed Under About The Debt Defier, Misc.

Bankruptcy…an easy way out?

Posted by Debt Destroyer on October 21, 2008

Over the past holiday weekend my family stopped by my wife’s parents house for a quick visit. We had a dinner and were able to catch up a little. One of the things that was brought up was that the neighbor girl (who was my wife’s childhood friend) and her husband had just declared bankruptcy.

Actually they declared bankruptcy back in February, but the family just found out about it now. And while it’s not newsworthy that a couple declares bankruptcy, that happens all the time. What makes this case a bit odd in my book is that it seems that it was planned out. They maxed out their credit cards and bought a SUV right before they declared.

Again this type of thing probably happens more often than I think it does (heck, my Dad declared bankruptcy twice). But what I found surprising was that my Mother-in-Law thought it was a good idea.

She views bankruptcy as an easy way to get a clean slate.

My wife and I tried to tell her that it’s not that simple, but when she quizzed us, we didn’t really know what to tell her. She didn’t mind wearing the scarlet “B” on her credit report and future job/loan applications.

“So what?” was her reply.

Here I thought it was common knowledge that bankruptcy was a last resort, not a get out of jail free card. But according to my Mother-in-law (her info is usually quite suspect), this couple is glad they did it. They lost their debt and got to keep their stuff.

So as soon as I got home, I did a google search and wouldn’t you know it, an article by Dave Ramsey came up on the first page:

“Myth: I’ll just file bankruptcy and start over; it seems so easy.
Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.”

Those of you who have read Total Money Makeover will recognize his advice on the subject because it’s taken word for word from the book. The article is fine, but it doesn’t really cover the damage bankruptcy causes.

Another hit on the first page on the search brought up www.bankrupcyinformation.com:

“The stated goal of federal bankruptcy law is to provide the honest debtor with a fresh start.”

Hmmm, I’m starting to see why my Mother-in-law thinks the way she does. I guess I don’t know what to tell her. In a way it is a fresh start, and for certain situations it IS the best option. But there must be some pitfalls to declaring bankruptcy, right?

I know there has to be a Happy Rock reader who can educate me (and the rest of us) on the nitty gritty of bankruptcy. Either with a first hand story, or an account of someone you know who is going/went though bankruptcy.

Is it a clean slate? How has it affected future financial dealings?

Until next time,

-DD

P.S. I know that this might be a painful topic for some people and I understand if you don’t want to share. It’s just that a lot of people are feeling the pinch of the credit crunch and will probably be exploring bankruptcy as an option. So reading some real-life examples might be helpful with this decision.

» Filed Under Credit Cards, Debt Elimination, Psychology of Debt

Is Effort A Myth?

Posted by The Happy Rock on October 20, 2008

I wanted to share this well written article by one of my favorite authors Seth Godin. He eloquently writes about why we easily fixated on getting lucky and path of personal effort.

Is Effort A Myth?

It seems that the bigger the hole we dug for ourselves or the larger the distance we need to travel to reach a goal the more we tend to wallow in hope. I think this is partly because it becomes harder to tie the small actions we can do now with so huge checkpoint in the future. So instead of action, we grind ourselves into inaction and wait for Ed McMahon. That, and luck is a lot easier!

Here is how Seth puts it:

And that’s the key to the paradox of effort: While luck may be more appealing than effort, you don’t get to choose luck. Effort, on the other hand, is totally available, all the time.

So now let’s get out there and put in some well focused extra effort and check back in a few weeks and see were it has taken us. I don’t think we will regret it and even if we do it is quite easy to return to watching a couple of hours of TV a night.

» Filed Under Financial Succes

First Chase Freedom Cash Back Check Recieved

Posted by The Happy Rock on October 20, 2008

Back in March I dissected the best cash back credit cards to see which one would net me the most free money. My calculations had me receiving $345 dollars of cash back each year from the Chase Freedom card.

Well in about 5 months I had the necessary 200 points accrued to request a $250 check, which included the free 50 points($50) after the first purchase. The $250 check arrived without incident after requesting the the cash out through the Chase website. We now average around 40 points a month, because I started routing more
purchases through my credit card since it was much more lucrative. At our current pace would be getting almost $700 dollars a year in cash back.

The money is really found money as the purchases were long since decided upon and paid for without ever paying a penny in interest. This is pretty much the only way that a credit card should ever be used. If you ever forget to pay you bill on time, have trouble controling your spending with credit, or don’t pay the bill in full off every month then credit rewards are just a ploy to suck more money out of you.

» Filed Under Credit Cards, Frugality

Accepting The Bailout For The Van

Posted by Debt Destroyer on October 17, 2008

I received a ton of good comments on my last post about my bailout option. They were loaded with valuable input. I am constantly thankful for how nice it is to have such a knowledgeable and sharing group to ask these kind of questions to.

And then totally ignore their advice

That’s right folks, we took the bailout.

From the comments most people were worried about how taking such a gift would affect my relationship with my mother, understandably so. But it was my wife who ended up having the final say in the matter.

She made a very compelling argument on why we should take it.

It would eliminate our van payment - which was the whole point of selling the van.
She likes using a “nicer” vehicle for her business.
We didn’t want to sell it in the first place.

The main point of her train of thought was the part of using the van for her business (wedding photography). She frequently transports the bride and others members of the wedding party in our van, and she likes having a nice vehicle to do this in. ( As superficial as that may sound, remember that Andre Agassi was talking about photography when he said “Image is everything”)

I think under different circumstances we would’ve made a different choice.

For example, not having a full-time job during a severe economic downturn made it difficult to turn down such an offer. Add on top of that a rather hectic schedule and I don’t really have the time to try to deal with this right now. I barely have time to write these posts, much less buy & sell a vehicle.

On the flip-side, if I wasn’t going back to school when we decided to sell the van I don’t think this offer would’ve even be made. I’m pretty sure this is my mother’s not-so-veiled attempt to help me pay for school. I think this because she offered to loan me about this same amount when I said I was going back to school, but I turned her down and took out a conventional student loan instead.

I’m pretty sure she came up with this cockamamie story about my Grandma & my Dad because she knew I’d be too stubborn and turn her down otherwise. And you know what?

I’m fine with that.

I totally understand where the comments were coming from when they said I should stick to my guns, turn down the offer and sell the van. I was there myself a couple of weeks ago. But then life throws you a curveball and all of a sudden your plans have a way of changing.

I’ve been involved with The Happy Rock for less than four months now. And there’s no way that I could’ve predicted that in that time, that I’d lose my job, go back to school, and receive a generous gift.

All I know is that we are committed to a journey that will help us get out of debt so we don’t have to worry about this kind of stuff in the future. Instead we’ll only have to worry about the important issues in life, such as how to get out of Thanksgiving Dinner with the in-laws.

Until next time,

-DD

» Filed Under Debt Elimination, Friends, Serving Others

Presidential Candidates And Personal Finance

Posted by The Happy Rock on October 16, 2008

When I look at both Obama and McCain and compare them to common sense personal finance, I realize that both candidates are the same. Neither of them get it. Both candidates have plans that are so far away from fiscal responsibility that it scares me.

Let’s take a glance at how the candidates stack up against some basic tenants of personal financial success : personal responsibility, spend less than you earn, get out of debt, have an emergency fund, and make your money work for you.

Personal Responsibility - I think the ridiculously huge pork laden bailout bill says about all we need to know on this one. Neither candidate is willing to let people(both businesses and consumers) be responsible for fixing their own mistakes and finding their own solutions. Both Obama and McCain pushed for the bill, both want to give ‘free’ money to people who don’t deserve it while the responsible Americans foot the bill. Neither candidate seemed to care about the extra 100 billion dollars that was added in order to get the bill passed.

Not once did Obama or McCain or anyone in government mention that they did anything to cause the problems. No mention of a ludicrously complex and shifting tax code, no mention of the Federal Reserve’s tinkering with rates and printing money from air, no mention of their own egregious spending, no mention of their lack of oversight in places they had promised to oversee and too much regulation in other places, no mention of any personal behavior change and no mention of encouraging change in our own citizens.

Spend Less Than You Earn - Both candidates want to cut taxes(decrease income) and significantly increase net(added in edit) spending. The plans of both candidates are set to add trillions to the national debt. Even in the debates both candidates refused to supply any hard answers to how they would pay for the bailout bill and the rest of their spending and income reductions(added in edit) through reduced spending elsewhere.

Let’s bring both candidates plans down to the trenches where Joe the Plumber lives. Imagine a dual income family in $100,000 of consumer debt. The husband decides that he is going to quit his plumbing job so that he can spend more time spending money on his personal hobbies. How long do you think it will be before their house of cards comes crashing down and the debtors that they are enslaved to come to exert their power?

The concept is simple, but it takes real behavior changes and dedication to make it actually happen. You also can’t cut your income until you stop your spending. People must control their spending before they have the luxury of willingly reducing their income. That is part of the burden that debt shackles you with.

Get Out Of Debt - Just the bailout bill alone was a thumbs up for probably a trillion or more of new debt. This means borrowing money from our ‘friends’ who we willingly give more and more control too or printing more money out of thin air which destroys the value of the dollar. The US gross debt has not gone down since 1961. The interest on the US debt was $239 billion in 2007 and 2008 which is 10% of the budget and the fourth biggest overall expense. I haven’t heard anything from either candidate that has attacked this serious issue in a meaningful way. Even balancing the budget just means you are treading water not actually reducing debt and neither candidate has given serious time to pledging to balance the budget.

Have An Emergency Fund - Nope nothing. Both candidates are content to fund their spending through debt and to use debt to solve problems. Personally, having a fully funded emergency fund was the single most gratifying and freeing financial accomplishment of my life so far. Both candidates seem content to decide to spend trillions of dollars with a only a few days of planning when a crisis arises. Not much thought is given to avoiding financial disasters and certainly not to a nest egg to fall back on.

Make Your Money Work For you - Unfortunately when you are spending 10% of your yearly budget on interest from debt your money has a lot of inertia to overcome. What happens when the spending doesn’t produce the desired results? Spend more? What kind of returns on investments are the candidates talking about with their massive spending plans? Social security, is that working? What thoughts are being given to the future and where will be financially in 20 or 30 or 40 years? I haven’t seen anything in the either plan that gives me any confidence that they are planning for anything other than the next 2-5 years.

Ok, so neither candidate could pass a basic personal finance test, what can we do about it? Take responsibility for your own behaviors that is the only thing you can do. Complaining, whining, or hiding your head in the sand will not get us anywhere. First, continue to live by these principles. Fight to get and stay out of debt, free yourself for bigger things, and prepare for the future. Help those in your sphere of influence. Shop at stores and businesses that support these goals. Talk about these things with each other and help spur one another onto bigger dreams. Finally, realize that our government system was designed to try and keep power as close to the people as possible. The bigger the federal government gets the more power you lose, so start writing your representatives. Speak up and speak out. Don’t stand for business as usual or you will get the same results. Let your parties know what you want and get others to join with you. When enough people make waves government officials notice, after all they need to get elected. Businesses notice because they want profits. There isn’t any other empowering choices other than taking personal responsibility for the situation.

*Source note - Wikipedia has a nice living document that compares the two major and four less publicized candidates on a broad range of issues - Click Here to view

» Filed Under Debt Elimination, Financial Succes, Spending

A New Twist to Selling the Van - A Bailout Plan

Posted by Debt Destroyer on October 9, 2008

Another page has been added to our selling the van story. You long time readers can skip ahead, but if you want to catch up here is the first part, and here is the second part.

Now for the third installment of “Will They or Won’t They?”

I was having dinner at my parents house a couple of weeks ago and my Mom asked how we were doing financially. I gave her my pat answer that I always give her,

“Just fine.”

But then I made the mistake of offering a little more.

“But we’ll be in much better shape after we sell the van.”

That set off her maternal alarms:

“What’s wrong?”
“But I thought you liked your van?”
“Is the business not doing good?”

After I calmed her down, I did my best to explain to her what our plan was:

Sell the van ($15,500).
Pay off the $11,000 grand we still owed, which would eliminate the $330 monthly payment.
Buy a $4500 vehicle and save up for a nicer vehicle.

She thought I had lost my mind.

I knew a lot of people wouldn’t like our plan (especially her), so I didn’t really give her protest much thought, until…

Later that night she called me up and asked if we were seriously going to sell our van? I assured her we were, right after Native American Day (in South Dakota, Columbus Day = Native American Day). She then proceeds to tell me how much I will regret that decision because I’ll end up with a junker that I’ll have to throw money at and this will money saving idea will backfire in my face.

She then made the offer…to pay off our van.

“What’s the catch?” I asked. She said there wasn’t one. $5000 would be from my money my Dad left me that I gave her to hold onto. And the other $6,000 would be from money my Grandma left my Mom to spend however she wanted.

I was a little fishy right away because where was this offer two years ago when we started my wife’s business and needed almost exactly this amount of money. Plus I could’ve swore I used up all the money my Dad left me for a down payment on our house. I mentioned this to her, and she said she’d check into it. Then I said how about she give just my Dad’s money to me so then I’d have enough for a $9500 vehicle after selling the van. She didn’t like the sound of that.

I knew it was fishy.

Another problem was that I had really wanted to do the responsible thing and sell the vehicle, learn from our mistake, and sacrifice for the next few years until we could afford another used van. But now a personal bailout plan is offered and I’m rather confused.

I know Frugal Dad recently wrote a post saying that you shouldn’t lend relatives money, but what about the flip-side of that coin? and what if it’s not a loan?

Even though it’s fishy, I’m thinking of taking her up on it. We don’t really want to sell our van, the whole point was to get rid of the payment, and this would accomplish that. So Happy Rock Readers I turn to you once again…

What would you do? Are there any pros & cons that I’m missing? Have any of you accepted a “bailout” before? If so, how did it turn out?

I thank you in advance for any responses and please stay tuned for the next episode of “Will They or Won’t They?”

Until next time,

-DD

» Filed Under About Me, Cars, Children and Money, Debt Elimination, Serving Others

Mark Cuban Blogs About How To Get Rich

Posted by The Happy Rock on October 7, 2008

A co-worker shared this blog post by Mark Cuban, owner of the Dallas Mavericks NBA basketball team, with me and I thought it was fascinating. For those that don’t know Mark Cuban is a rags to riches stories who went from broke and jobless in 1982 to a wildly successful entrepreneur worth 2.8 billion dollars in about 25 years. In this article he shares his tips to becoming rich. Here is my ultra quick summary.

Develop personal discipline
Live frugally
Avoid debt
Have cash
Find a niche in an area you love
Use the cash to seize opportunities when it comes
Bust it hard

Here is a quote that gives you a good flavor of his attitude: “If you use a credit card, you don’t want to be rich. The first step to getting rich, requires discipline. If you really want to be rich, you need to find the discipline, can you ?”

If you follow the link at the bottom of the article you can also read the story of his rise from nothing. Mucho entertaining and inspiring.

Enjoy.

» Filed Under Chasing Dreams, Credit Cards, Financial Succes

keep looking »