Uncommon Cents

Addiction might be a bit strong, but one of the ways I’ve been getting cash recently has been “cashover”; shopping at a store and while checking out, using my credit card and adding $20-$60 in cash to the total, which I receive from the cashier. Two stores I sometimes shop at–WalMart and Safeway–offer this service.

I first tried this a couple of months ago as an experiment to see if would be charged any kind of fee or interest (like if the money was treated as a cash advance). To my delight, Discover didn’t charge me anything for the cash; it was treated just like a purchase, so as long as I paid it at the end of the month, nothing extra.

In my eyes, this is like a short term interest free loan, which has its ups and downs. This is not any different, for instance, than when I put something on my credit card except what I get is actually cash. I am not sure that the cash I’ve been getting has been earning rewards and I don’t know if any card besides Discover is offering this. What I do know is that while I am currently enjoying this, there is a lot of danger with it; if I fail to pay on time then I will be charged interest on it, and I can easily overextend myself this way.

To me, this is, like credit card use itself, a sharp knife; it’s dangerous if misused, but can be a bit help to the skilled person. I would have a hard time saying I recommend doing this, but it’s been something I’ve been doing and will continue to do for the foreseeable future.

In light of the ongoing issues with my truck and the unexpected expenses I’m dealing with, I’ve looked at my expenses over the next few weeks to figure out what I can do to cut my spending and reduce the hit on my emergency fund.

Some of the expenses that are out the next few weeks:

Taking one of my friends out for her birthday;
First birthday party for a coworker’s daughter;
Coworker’s wedding;
Going away party for two coworkers.

Some of the expenses that are suspended for awhile:

Nikon D40 digital single lens reflex camera;
1.5 terabyte hard drive.

Some of the expenses that will be paid without interruption:

Offering (tithing at the temple);
Mortgage;
Monthly investment via Sharebuilder;
Regular budgeting for fixed expenses;
Connectivity (Internet, phone) bills.

Some of the expenses that will be looked at for any way to reduce them:

Lunch out on the weekends;
Holiday presents;
Coffee and snacks.

It’s unfortunate that all of this happened; I will miss the fun of going out with my friends (even though I’m not going, gifts are on the way–I find that for me, giving a gift is a priority, but going on the outing, which only saves me a small bit, is not), and I really wanted to get a hard drive with more capacity for my growing media collection. Still, this is what might be called a first world problem. This is not my losing my home or being unable to afford food to eat. In a theme continuing from last week, I realize I have lots to be thankful for in this holiday season and am far more fortunate than many others. Sooner or later, I’ll get a new digital camera and a larger hard drive–and I’ll do it without going into debt and with a fully funded emergency fund.

Holiday shopping is not new, unless you’re a teenager getting your friends gifts for the first time. Still, why does everyone seem financially strapped when the calendar turns to December (or, worse, in serious credit card chaos when the January calendar comes out)?

To me, this is one of the biggest examples of slow learning. If it happened last year, what makes us think it won’t happen this year? What can you do to try to get your holiday shopping budget under control?

Start Now: Yes, now. If you start for 2009 right this second, that’s great! Even if it’s 2008, the earlier you start, the better. You may not necessarily have to actually buy everything (I do appreciate the power of holding onto cash as long as possible) right now, but at least have a plan for people’s gifts and figure out how much they cost. In addition, save, save, save! Consider this next tip as well…

Separate Saving from Discounts: Many people cannot separate the concepts of saving money for the holiday shopping from buying the holiday gifts. They are not the same thing; no matter if the great bargains don’t come out until November and December, the dollars can be put away starting anytime. If you want to hold onto them until you find something ridiculously discounted the day after American Thanksgiving, that’s up to you, just make sure you start accumulating those dollars early on.

Keep Putting Dollars Away: Don’t stop your holiday saving, no matter what time of year it is. You will need those dollars and you’re better off having them than not. Simply figure out how much you spent last year on the holiday shopping, add 10%, and divide by twelve. Put that much away every month into a high yield or money market savings account: key words–every month.

Don’t Get Caught Up in Black Friday Madness: Black Friday–the day after American Thanksgiving–is traditionally the start of the holiday shopping season, and at least in American is known for having some of the best bargains of the year. In fact, some Web sites such as Black Friday Info are notorious for putting out advertisements for large retailers early. Yes, these can help you spend less, but be careful and don’t get caught up in the madness. Make a plan, have a plan, stick to it!

Keep Writing Stuff Down: Remember our often discussed friend the spending log? Keep using it. Review all of your purchases–even before you buy–as well as figuring out if you’re spending what would be a reasonable amount for the items. It’ll also help you with planning for next year.

The holidays are supposed to be a happy time of year, but for so many they’re a stressful time of year, not just due to the flurry of activity but also due to the financial stressors. Plan ahead, use your plan, stick to it, and reduce your stress and increase your happiness toward the end of the year!

It’s far more common for me to have money owed to me than to owe anyone money. I’ll often front money for group gifts or do work for folks with payment expected later or lend money to someone who is in need; more often than not the debt is forgotten. This is not just a financial problem, but a social one as well; many relationships are destroyed over debt. Almost every divorce in this country has as one of its two root causes financial issues, which shows just how much of an issue money can be. How to deal with owed money?

Consider Your Options: Yes, in some circumstances (such as work for someone else), you may have legal options (like going to court or considering it a loss for tax purposes), but in general, those aren’t going to make a difference. Another option–the one I most often do–is to just consider it a gift rather than a loan. I basically emotionally and mentally write off whatever I’m owed at the end of a year.

Think About Reminders: Sending reminders to people can’t hurt, and might help. In some cases (like with family), it may be very difficult to give reminders without sounding sarcastic or angry; email might help in that case.

Keep Records: If you are going to have any hope of collecting money, make sure you keep records of who owes you, how much, when, and why. And if you’re doing work for someone with promise of payment, get it in writing. It might not be worth hiring an attorney to draw up an actual contract, but at the very least, keep the emails of the other person for reference later.

Be Wary: Really think hard about lending money. Remember situations when you were not repaid. If you’re considering lending to someone who hasn’t repaid you in the past, remember the old saw about, “Fool me once…” Be very careful about this!

Don’t Lend: Perhaps the best way to handle this situation is to simply not lend people any money. It’s actually fine socially to do so; there’s no expectation that anyone lend anyone else money unless it’s a bank. This would be the ultimate way to prevent such issues.

Having money owed to you, particularly by friends and family, can be a financial as well as a social issue. There are some options for dealing with it, including just considering the bad debts gifts, or even legal options such as legal action or using them as bad debts for tax purposes. As for me, I’m still more likely by far to have money owed to me than the other way around, and at some point, at least emotionally, I just consider all of it another gift.

I had no idea things have gotten quite this bad. Even “good” debt–student loans–are getting to the point where people are heading overseas to avoid payment.

CNNMoney.com has an article on “Student loan fugitives”: United States citizens who take out student loans and, when they realize that the difficult to discharge loans are too much, default and go abroad to avoid collection agencies.

While this appears to be a small percentage, it is true that higher education costs are high and constantly getting higher and when students get out of college, they’re typically not very ready to deal with debt. Compound that with the fact that many students pile up other kinds of debt (can you say credit cards?) during their college years and we have a recipe for potential disaster.

Still, it seems to me that going overseas to avoid paying is quite extreme. I hope it’s not getting more common, but if it is, that may just be an indicator of how bad things have gotten with debt.

Yes, the economy is a fiasco. Yes, the stock market has been in bear market mode. And yes, the job market is tight. People are uptight and I hear tons about financial distress everywhere. I’d be lying to you if I said that my portfolio was looking great.

Yet things are not horrible, at least not for me. I still have no credit card debt; I still have a nicely established emergency fund; my paychecks are coming in on time; my blog is earning a little money; my spending is managed pretty well. In fact, I’m going to earn more money in 2008 than I ever have.

The point is that even in a downturn, not everyone does horribly. If you have planned and executed well, you’re more likely to do well. Yes, it’s possible that your employer will unexpectedly collapse (anyone remember when Lehman Brothers was a secure place to work?), but it’s also possible you’ll have many other opportunities lined up or multiple streams of income–a subject that we really need to talk about here but haven’t–going on.

Yes, luck has something to do with it, no question, but to some extent you make your own luck. While there’s no question some of the economic slowdown has affected my finances–I can see that whenever I log into my Vanguard, Firstrade, or Sharebuilder accounts–due to my having taken care of my debts, achieved pretty secure employment, and having multiple streams of income (including this blog), in some ways, 2008 will be my best financial year ever.

Tonight at my part time job, I taught the money management class. Realistically, this class comes down to one statement: spend less than you earn. However, that doesn’t take the requisite two hours, so I actually have to do a little more work, but there really are just two possibilities to improve your cash flow.

First, increase your income. Get a better job or a second one; start a business or a blog; sell stuff on eBay and Craigslist; snowflake, snowflake, snowflake!

Second, reduce your expenses. Do a budget and figure out things you can eliminate or cut back on; cut coupons; do comparison shopping; reduce waste; consider cheap and healthy hobbies like hiking or running.

That’s really it. There’s no magic anywhere else, it’s really just those two things. They’re the only ways you can actually improve your cash flow, so consider your options carefully.

Welcome to your week late Link Payday! It’s been a horridly busy few weeks with the fumigation, the century ride, and life in general. Now that I’m having a weekend where I’m not ridiculously busy (just the typical really busy), I’m trying to get caught up here on Uncommon Cents and giving you highlights of some of the best personal finance blog posts of the last few weeks:

JD over at Get Rich Slowly shares a post by guest blogger Erica Douglass who shares the secret to Finding Time to Pursue Your Dreams. The big secret: turn off the TV! I’ve already done that, though; I have to find 750 more post TV hours to pursue my dreams here…

One of my favorite personal finance bloggers (actually, one of my favorites regardless of area of interest), Mrs. Micah discusses some of the benefits of Combining Kiva Lending and Birthday Presents and how it can be a way to give back to the community and the world. While Kiva is interest free lending, it can benefit those in developing nations big time and has very little in the way of default risk. I’m thinking about doing just this.

Frugal Dad spends some time doing dirty work for the rest of us when he puts his energy into Evaluating the Best Gas Credit Cards for Rebates. While I agree that the Discover Open Road is a great card (I have one), my personal choice, the Pentagon Federal Credit Union Platinum Visa isn’t mentioned–until it was commented on by another reader and myself, anyway!

My buddy Ron over at The Wisdom Journal gives us 17 Sneaky Savings Strategies. These c an help whether you’re trying to pay off debt, save for specific goals, or save for retirement. This is a fantastic post for all of us who are interested in trying to save.

Finally, Trent over at The Simple Dollar gets right to the heart of the matter of people living beyond their means (which is the primary cause of financial distress) when he says it right out loud and pulls no punches by telling us to Stop Trying to Impress Other People.

And that’s your Link Payday for October 12, 2008!

What’s the main driver of the U.S. economy?

The answer is in your mirror. It’s you.

Consumer spending is the biggest single factor in the well being of the U.S. economy. Notice how the second quarter (2.8% annualized growth of gross domestic product) wasn’t so awful? That coincided with the delivery of economic stimulus payments going out across the nation. Those dollars got spent, and the spending helped the economy.

While the economy has grown over time, driven by spending, during that same time the savings rate of those in the U.S. became negative–people spent more than they made. Anyone can tell you that can’t go on forever. People went into typical consumer debt (including credit cards) and then, hanging on the coattails of the housing boom, took out home equity to keep spending.

All things come to an end.

The current credit crunch and real estate debacle have devastated these money supplies; combine that with the increase in fuel prices (which follows into the realm of essentials), and it’s clear that the average consumer can’t keep pumping more dollars into the economy, because they don’t have the dollars to do so–not even borrowed dollars.

Until consumers can somehow put more dollars into the economy, the economy will continue to suffer, and until the economy improves, it’s hard to imagine consumers putting more dollars into the economy. Seems like a Catch-22? In many ways it is, but that’s the situation we’re facing ourselves in today. Stay tuned!

This is being written the night of Wednesday, October 1, 2008.

Just a few days ago the House of Representativest rejected the $700 billion bailout package which almost every personal finance blogger I’ve read opposes. It actually was a nice demonstration of the power of the people in politics, as apparently the switchboards were overloaded with objectors–of course, the impending elections in a hair over a month make the politicians very aware that their constituents are their bosses.

Of course, it ain’t over until it’s over, and I (among many others) was sure that the bill would somehow get through, just hopefully with a lower price tag.

What’s passed as of now from the Senate is still at $700 billion bailout package, but with some changes to hopefully make it more palatable to the House.

Come on, people! The big issue is not these changes; the big issue is the dollar amount! We can’t afford a $700 billion dollar bailout package, it’s that simple. Find a way to do it with less, or forget about it and go in another direction.