Wrongful attack on a balance transfer player

I found this article on Boston.com today.

The guy (a retiree) has about $45,000 in credit card debt that he just transfers between 0% balance transfers options. He's making about 8-9% in interest. The author goes a bit crazy saying how this is such a bad deal. I totally disagree.

The guy does have money in risky investments, but 8-9% returns shows that he's not going too crazy on what he's putting his money into. He probably won't lose all of his money if the market crashes (although anything can happen). The guy has enough to pay off the balances, so he's not worried about anything.

The author goes all wrong talking about the bad things that happen to your credit report when you do these offers. This is where the author has no idea what he's doing. The guy is a retiree. He will most likely not be getting a mortgage ever again, so I don't see why that is mentioned. If the guy knows what he's doing, he's not worried about getting any loan at all. This guy is not at the beginning of his credit life, he's getting closer to the end. So what if he has a few points off of his credit score. I'm sure he's not going to be affected.

This author just doesn't understand the game, or doesn't have the organizational skills to do it. He shouldn't be bad-mouthing people that are playing the game and winning.

Why I hate this article:

Credit cards should be used only as a safe and convenient alternative to
carrying cash. Ideally, you should not incur more debt than you can pay off by
the end of the month, thus avoiding any interest charges. (OK, go a bit longer
after the holidays or a vacation. But not more than two or three months.)

Holidays and a vacation are not really a good excuse.

Opening numerous card accounts, and frequently shifting money between
cards, without reducing the overall debt, is a red flag that could hurt his
ability to borrow money in the future... In fact, this behavior with credit cards is likely to hurt one's ability to get a mortgage or car loan, as well.

The guy is a retiree! Annoying.

HSBC isn't making sense

For my money making experiment, I'm putting my money in HSBC. It's a good deal since right now I'm getting 6.0 APY on my balance. Setting up the account, though, has been a pain. At first it went smoothly and I was able to transfer in money and everything. Then I had to wait a few days for the PIN. This was annoying, but I guess ok. I received my PIN yesterday, logged on, and then went to transfer more funds into my account. I had to set up my other bank in order to do this. I thought this was weird since my initial deposit was from this one bank account. So I go to set it up and it says it can't verify it! THIS MAKES NO SENSE. How could it not be verified, when this is where my money originally came from?? For this illogical series of events, I'm going to rank HSBC as a 3.5 out of 5. They're saved by their decent interest rate.

Festival of Under 30 Finances is up

The Festival of Under 30 Finances is being hosted by Money, Matter, and More Musings and one of my posts is part of it.

Take a look. You can find the festival here.

Tax Preparation

I really should find some time some year to take tax preparation classes. I don't want to pay others to do my taxes, especially because right now they're generally simple. I just occasionally don't always know exactly what I can and can't do, or what I should do.

I started my taxes last night just to get an idea of things. I'm still waiting for two more forms, but I generally know what each thing is. My only two confusions come with my Sharebuilder account and tuition stuff. For my Sharebuilder account I got the $50 promotion money, plus about $1 in dividends. They said I didn't make enough to get a 1099, so I have no idea what that $50 falls under. I'm assuming right now that it is bank interest, but I'm not really sure about that. I'm also assuming that the $1 is an ordinary dividend. I hope that's right.

For tuition, both my wife and I were in school last year. I was a little confused about the wording on the Lifetime Learning Credit. My wife received over $10k for tuition in student loans. As far as I can tell, student loans count as money borrowed from others to pay for qualified expenses. So my thought is to use that for the Lifetime Learning Credit since the cap for that is $10k per return. I paid over $4000 for my own tuition, so I was thinking I could use the education deduction for myself since the cap is $4000 per return. This maximizes our benefit, and should be ok since I'm using only money for my wife's education for the LLC, and only money for my own education for the deduction.

The state return is a whole other beast. Schedule B for MA state taxes is weird and annoying. I didn't do any stock selling or anything last year so I don't have to deal with capital gains and losses. Next year may be different though. Hopefully this all seems ok and will be fine. They really need to make this easier, but then again that would put a lot of tax preparers out of a job (or at least extra income).

Free money experiment - update

I started writing about and planning this in November. To see my original plans, go here. Other posts about this are here and here.

This has been a long process, so I'm really still only at the beginning. I didn't think it would take this long at all. I've also decided that my little deal with Sharebuilder won't count. Although it was $50 free, I did it so long ago that I'm just ignoring it.

Anyway, I applied and received my Citi card after I had to jump through hoops. I made my purchase so I would get my free 10,000 points, then paid off that small amount. I then did a balance transfer for the full credit limit. Unfortunately, they gave me a low limit and I didn't even think about calling and asking for a higher limit. Samerwriter did this, and I should have thought of it. Anyway, I received the check for $4300 and deposited it. I opened an HSBC account yesterday and put the money in there. The process was a lot easier than I thought it would be, although I still have to wait a week for my password to actually access the account.

I also had my wife apply for a transfer from AmEx. We did this through her Capital One card (the only other card she has), but they take forever. They keep the money for 30 days and then it takes another 7-10 days to send out a check. We finally received it two days ago, and it has been sent to the bank. Since it took so long we already had to make one payment, so I'm only transferring $7840 into the HSBC account.

Since then I've applied for another account through Discover. Hopefully they give me a better limit. I'm just waiting for the card to come in the mail.

I'm still thinking about using some of the money in a brokerage account. To make money, you do need to take risks. Although the interest from HSBC will be nice, I think I can get more. A little risky, but I think it will pay off.

Saving vs. paying off loans

This question is being asked for the Carnival of Under 30 Finances, and I thought i'd answer:

Assume you are an average 25 year old with $25,000 debt (on account of your student loan) You have been given a lump sum $10,000 and the following four choices:

1. Invest it for your retirement funds.
   
2. Save/invest it for your future home.
   
3. Save/invest it towards your child’s/children’s future college education.
   
4. Pay part of your student loan debt.

You can pick only one of the above choices towards which you should use the entire $10,000. Which one will you pick? ..and Why? Assume that the rate of return on the three investments choices is the same and the student loan charges you an interest rate that is equal to this rate of return. Would your answer be any different if the amount was $25,000 instead of $10,000? Again, you can pick only one of the choices.

This isn't the easiest question since there are so many things to consider. I do know that I would definitely not do #3 (even if I had children). I stick with the idea that you should invest for yourself and do what you can for yourself first. I took out loans to get through school, and I know my children will be able to. Not only that, but I want to limit the amount my children have so that they will not be denied all financial aid. Of course, it would be ideal if I could just use my own money to pay their tuition.

To make it more complicated, if the $25,000 in student loans is spread out over several loans, I would pay off some of them. This would lower my monthly payments, allowing me to put that extra money into savings. This way I'm not losing as much money on the loan interest and I can have more money from my take-home pay to work with.

If the money was all in one loan, I would probably invest it in an investment account to save for a house. If I need to, I would pay off extra of my student loans as time goes on, but I would rather have the kick-start investment. The loans generally aren't so horrible that I can't handle them for a few more years. Also, I need as much help as I can get considering a 20% downpayment for a decent house in my area will be between $70,000 and $100,000.

If it was $25,000 instead, I would definitely put the money in investments to save for a house. The loan will continually be paid down, and so the interest will be less over time, while the amount of interest gained from the investment will increase. Plus, since the $25,000 would be unexpected, it wouldn't make a difference to my current budget, and so I could leave the money to grow somewhere without really thinking about it.

Squeezing what I can from miles programs

Now that I've signed up for the AAdvantage program (it's free), I want to get as many miles as possible. Luckily I have a miles card that is not on the same rewards program. This means I'm going to be increasing my miles faster (although on different programs that can't be put together, but that doesn't matter).

Here's how it works. If I use my credit card that is registered with the AAdvantage Dining program, I get 3 miles per $1 spent. On my current credit card, I get 2 miles per $1 spent at restaurants. So if I go to a certain restaurant, and say I get a $50 meal including tax and tip, I will get 150 AA miles, and 100 other miles. Not a bad deal.

For eshopping, I go through the AA shopping site and if I want something from Sharper Image that costs $75. I get 5 miles per $1 (375 miles), plus 75 miles on my other card. This works in other variations as well. The only disadvantage is that I will not be getting AA miles for most of my regular purchases. This will slow down their growth. But, I will still be getting miles on my credit card. Overall, I'm part of 2 mileage programs with no fees. Seems to be pretty good in my mind.

I've signed up for a frequent flyer program!

Yet I'm not a frequent flyer. I've never really thought about signing up for one of these because I rarely fly now that I'm closer to my family. I was always under the impression that you either needed to fly a lot, or get a specific credit card with an annual fee to make a frequent flyer program worth it. This is why I signed up for a Capital One card, I could use miles for almost anything, not just flying. Using this card will still be a huge benefit, a way to double, or more my miles. I'll post my reasons later.

My wife and I, though, do like to travel, and travel is expensive. Getting our honeymoon plane tickets from my dad's miles made me think again about one of these programs. I figured there must be something more to them. Oh how much I never knew.

Since American Airlines tends to go to places I like, has a good, wide ranging network, and since I've generally had good experiences with them, I looked at their program. Their website has so much information, and there are so many different ways to gain miles. You do need to use them every few years, but I do plan on traveling occasionally so this isn't a big deal.

We will not have a credit card that will add on to our American miles. This isn't a big deal at the moment. But there are so many other ways to get the miles. You can put your credit card into their Dining system, and when you use that card at certain restaurants, you will get a certain amount of miles per $1 spent (up to 10 miles per $1). Not a bad deal. And if you go through their eShopping site, you can get a ton of points for a lot of things. For example, I was at Barnes and Noble the other day to find a book (which they frustratingly did not have). If I buy it at BN.com, I can get 3 miles per $1 spent. They have a decent selection of stores, so I know we could easily gain a decent amount of miles going through that site. Check the site out here.

Hopefully this will give us some more options when we want to travel in the future.

Getting rich... casino style

First I need to say that gambling is NOT the way to make your money grow. Even professional gamblers have there problems. My freshman year roommate's dad was a professional gambler. During high school, his dad came home one day and told him he wasn't going to college. Then after a big college basketball game a few weeks later, his dad told him he could go anywhere he wanted. This is not the way to live in my opinion. Casinos are set up to take your money. Don't be fooled.

Now that that is out of the way, I enjoy gambling. I took a statistics class in college that spent about 4 or 5 weeks on roulette. Although the course told me that the game was set up so you would lose, all I could think about was playing it. My first attempt in Vegas did not go that well. Luckily I only spent $20. But a few weeks ago I went gambling again and I did a lot better.

Although making my money go up 200% was awesome, it took a lot of risk, and there was never a guarantee. My personal preference is large sums on the outside. It may not be that exciting, but when I'm turning my $40 into $200 while everyone else on the table is turning their $40 into $5 or $10, obviously I'm having a better time. Playing the inside is just hoping you pick the correct number. I've tried that, and you can get lucky and make your high payout.. but 35 to 1 on $1 is only $35. Playing the outside is looking at the big picture. You're playing the same game, but since you have to play a certain amount, you're putting more on a larger group. You always have better odds betting on 12 than on 1.

What does this have to do with personal finance? Well, you have to take risks to make money. You just have to be prepared for the consequences. Most investments are risks. There is never a guarantee that you will make money, except with interest bearing accounts. Keeping the value of your money isn't exciting. Watching your wealth slowly grow can be a bit exciting at times, and just enough to maybe keep you doing it (as you should). But overall betting $60 on th first 12 is the most exciting. As excitement goes up, potential for gain and loss also goes up. But you have to have some fun sometimes.. just do it intelligently.

My Men's Wearhouse experience

For our tuxes for the wedding we went to Men's Wearhouse. With the tux rental they gave us all a 10% discount that had to be used before the wedding. Since I needed a new suit, I decided to go and use the discount. The goal was just to get a suit and I set a limit of $250.

The store I go to can be very frustrating. They are really pushy when it comes to buying things. So I went in, and after some tries I found the suit that would work for me. One of the suits they tried to sell me, though, was a one with 2 pairs of pants. One of the pairs I would never wear. The guy tried to tell me to think of it as me getting a pair of pants for free. I laughed and said there was nothing free. He insisted it was free. So I laughed and told him that if it was free he wouldn't be getting paid for it, and I know he'll be getting paid for it.

When trying on suits you have to wear shoes to get the best idea of what the suit will look like. The salesperson was trying to convince me that I loved the shoes. One wasn't bad, but ridiculously expensive. The other pair was comfortable, but just plain ugly and stupid looking. The whole time he kept trying to say how much I loved the shoes and how I should buy them.

Then when I picked my suit, they put together some shirt and tie combos and tried to sell me those. I let him do his whole thing and try to convince me and then I said no, because I had a budget. He kept insisting he was trying to save me money because I would be using my 10% discount. He had no idea of what a budget was. Then when I asked about some prices he said "I can't do that in my head." These weren't anything hard either. So I asked what he did when the computers were down. And he said, he woldn't bother with it. So I asked what he learned in school, and he said, "well I didn't go to all of my classes." You think?

Anyway, after being annoyed for 45 minutes about saving me money and getting me all new clothes, I bought just my suit and spent under $250. They weren't happy, but they should learn that pushy is suave, not does it work on some people, especially those that fight back.

Wedding - What I'd do differently (Part 2)

The food at our wedding was generally good and free flowing. The catering company did an excellent job. There was more than enough appetizers going around, they had a server especially for the wedding party as they did the pictures, and so there was never a shortage of food and drink. It was excellent. Generally the food was pretty good also. But in general, we were lucky. We liked the sales pitch they gave, and they had good references. Unfortunately, they didn't have a way to taste the food. The only option was to ask them to put some of the stuff together to try it while you were picking. I don't like this idea because I think you should be able to taste the food before you sign a contract. We went against this method. Also, since the caterer was about 35-40 miles away, we never tried any of the food we wanted for the wedding.

The appetizers were fine, but the entrees could have been better. It could have been that I just wasn't too hungry during the wedding. Everyone else seemed to say it was pretty good, and the veggie option was especially good. I still could have been happier.

Looking back, I should have stuck to my instinct and made sure I tried the food before committing, either to a contract, or to the specific dishes at the wedding. People remember the food if it's good, so you should aim for the best. We did this with the cake, and it worked out really well. The big companies we tried were terrible. We went to a small place that was a little more expensive and would charge a delivery fee, but the cake was excellent and moist, and tasty.

So try things before you commit if possible. That will avoid some disappointment.

Wedding - What I'd do differently (Part 1)

Luckily, my wife's parents paid for almost the whole wedding. This was a huge help since I would not know how to afford a wedding that my wife wanted. Interesting how women want these sometimes large, glamorous weddings, yet they turn out to feel somewhat different. My wife, for example, doesn't feel like it was all that wonderful just because it was too short and we were so busy with pictures and all of the other stuff.

Knowing how much the wedding cost, I would have changed a lot of things. First, I think we would have made it a lot smaller. There was really no need for a big wedding, or anything that glamorous, as fun as it was. This, of course, was not my choice though. My father-in-law was giving away his last, and most favored, daughter. He of course wanted to make it a wonderful experience, and therefore didn't spare much expense. I wouldn't have minded cutting it a bit and using the extra towards our future goals. Even cutting the cost by $10,000 would have made a huge difference in our finances, and we probably could have cut a lot more.

So my first conclusion is that it was too big. I think we could have had a great time with a wedding of only 40-50 people. To include family and friends, though, required us to invite a lot more. Plus we didn't want a small wedding. We didn't know any better. The cost per person expenses was at least $80-$90. Cut the list by 50 or so and that's almost $5000 in our pocket. That would have been nice.

Honeymoon

Our honeymoon was pretty good. We prepaid the hotel, so that was all set and something we didn't have to think about. Some other things didn't work out as well. We planned our flights poorly. We originally wanted to spend a few hours in Honolulu before we flew to the other island. After 12+ hours of flying though, all we wanted to do was get to our hotel. So we decided to change our flight in the airport, and it basically cost us the price of the original tickets. If I had known this, I wouldn't have followed through. Or we just should have planned better in the first place. Our flight back also had a 4 hour layover, but I wasn't about to buy new tickets for that, so we just dealt with it.

I had a quote for the car that was reasonable, but this ended up being way too low. The quote waws for about $220 or so. I then decided to do the "return the car on empty and it's ok" deal. We shouldn't have done this since we ended up barely driving anywhere. Although we left the car with almost a 1/4 of a tank, the gas was only $3.00 a gallon, and we would ahve saved money by not paying the $50 for this deal. Also, we were asked if we wanted to have both of us as drivers. I said yes, but they did not explain that this cost an extra $50. I found this out when we returned the car. Overall, the car cost $100 more than expected.

Before we left we didn't really think much about the price of food. We thought we could possibly be ok with around $700 for activities and food. We were greatly mistaken. We didn't end up doing any activities because the weather was rough most of the time, so a helicopter or boat ride just wouldn't have been fun. But food it self was extremely expensive. Anywhere in the resort area it would cost at least $10-15 for an appetizer, or maybe a burger and fries. Luckily we had free breakfast (well we had to pay gratuity), so I at least tried to fill up on that. My wife doesn't like doing that, so she generally would want lunch later. We eventually set up a simple budget after 2 days, and we almost kept to it. It started to make things less than happy, but we worked through it anyway.

So overall we spent more than expected. Luckily we should be getting a decent amount back from the IRS, and our wedding money will cover at least my spring tuition. I'm not sure how to deal with my summer tuition though. I think we need to readjust our budget a bit, except I'm not sure what else I can take out. I'm sure there's something.

Well this sounds kind of like a blah post, but really, the honeymoon was good. We had a lot of fun, sat by the pool, and enjoyed ourselves without thinking too much about money and consequences. We had some good food, good laughs, good scenes, and decent weather. And we got to see some whales breaching from the beach!

Back to normal life

I'm finally home and back to work, so I'll be adding some posts soon. Not sure when I'll have time, but it will happen. I have plenty to say about money, my money, watching my money go to $12 cheeseburgers and $30 entrees in Hawaii, and all types of craziness.