My response to this (buzzfeed/usaa/10-things-youre-probably-doing-wrong-with-your-money). Overpriced coffee is a status symbol. Anyone that reflects upon the price difference between a cup brewed at home, and a cup from the local chain coffee house should clearly see that youre not buying the coffee, the experience, or the customer service, but the cup with a logo. The same goes for things you dont need, and lunch in a public location. Provided that you have a stable, predictable income, automated bills are okay. If you find yourself just scraping by each month, auto-bills will ensure youll mess up and overdraw your account. That can, and often does lead to an overdraft loop, where before you get paid, the bank will take most of your money for the next month, and when the bills come due (and automatically get paid) then you start the next month owing the bank more than your next paycheck... and so on. The auto-bills always seem to hit between 1 - 24 hours before your paycheck posts. You end up paying huge fees not because *you* messed up, but because the calendar just happens to place the 1st on a Sunday. Often times, it is better to default on a bill for a day or two (depending on the bill) than it is to overdraw your account. In my experience, a phone call fixes most day-late payments to companies, but nothing stops the bank from charging you whatever fees they feel like. The best strategy is to know what youre bills usually are, and set aside the money for next months bills as soon as you get paid, before you do anything else. Dont touch that money for any reason other than paying next months bills. Having too many credit cards leads you to forget that you have a lot of debt (or forget a payment), but having a huge debt on one credit card is far worse on your credit report. It also means that the minimum payment will quickly exceed the payoff amount, and youll find yourself underwater. Most of my credit cards (I cant speak about your cards, youll have to read your own contracts) have a minimum payment required of $25 / month or a percent based off the current balance + interest charges, whichever is higher. Even when they dont have that $25/month minimum, I assume that they do. So splitting say $10,000 over 20 store-specific cards, for example, will require that I pay $500 / month, while if it was all on one card, the minimum payment would be about $250. That is the difference between taking two years to pay off all the cards or five years to pay off the one, and that is only if I keep paying $250/month for all five years. Im way more likely to stop paying the higher amount as I see the minimum payment drop, which will extend the pay-off day for 28 years. The added benefit of doing store specific cards is that if you want to pay it off, you just stop buying things from that store, where one normal credit card enables you to lump together and forget the monthly coffee bill, the unused elliptical machine in the basement, the gym membership contract that you didnt have time to use, and all the fast-food you ate. Worse than that, you tend to convince yourself it was just your gas and groceries that got you into the mess to begin with. With store cards you *know* where your debt came from because they send you friendly monthly reminders. Still, you have to stay on top of all 20 cards or youll find yourself in some serious trouble. Ive always found that having cash encourages thoughtless spending. Sure, it might physically limit the amount you can spend right now, but that is just in between trips to the ATM (and as the frequency of those trips increase, you will forget the last time you were mashing in your pin). Cash spends like water and is nearly impossible to track unless you keep a receipt book, not unlike the olden days when you had to balance a checkbook (aint nobody got time for that). There is also the psychological priming effects of having cash; the more cash you carry at any given time (if you count it, you know, to confirm you have as much as you think you do, or the balance on you book), the more self-sufficient you feel, the less value you place on money in general, and the more self-centered you tend to be (because a personal assumption of self-sufficiency tends to lead to projecting that feeling toward other people--if Im self-sufficient, then you should be as well, so when you clearly need any type of help, like holding a door, or picking up dropped items, Im far more likely to assume that you dont). Feeling self-sufficient is empowering, but empowerment based on a highly limited resource, like money, tends to lead to extravagance, which is counter-productive if youre tying to not spend money, especially if you happen to have a wallet full of it (and an ATM on every corner to help you keep a wallet full of it). Isnt a much better idea to use a payment method that allows for carefully tracking your spending? End of the month expense reports dont lie (as long as the books that generate them are accurate). Cash hides spending. After the money is out of the bank, I always consider it water under the bridge, already spent. If you want to save money, live like you have none. Hungry? Did you bring your lunch? No? Wait until you get home, and then dont forget tomorrow (skipping a meal will increase your stress, but it generally wont kill you). Tired? Get more sleep (caffeine doesnt wake you up, it gets you back to a non-addicts energy level--youre not tired, youre going through withdrawals). Still dressing in last years fashion? Are your clothes in tatters? No? Then keep wearing them, you dont need new clothes until youre old ones arent wearable. Your job requires you to present an image of an on-trend chain-store coffee drinking money-bag? Does it pay you enough to afford that image? No? Well, theres your problem.
Posted on: Sat, 23 Nov 2013 20:48:36 +0000
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