Category Archives: Money

The only credit card I use

When I was in college, I learned “the credit card lesson.” It’s a familiar story. I started with an “emergency card” that I didn’t use for a year. Then I had some car problems that landed my only car in the shop with a $400 bill.

I decided my broken car qualified as a real emergency, so I charged the repairs. When I realized how easy it was to magically have extra money, I started charging stupid things. Pizza, DVDs, bar tabs. I ended up with $4000 in debt over a two-year period.

Luckily, that was enough for me. Obviously $4000 is a lot of debt for a 22-year-old, but it was manageable. I paid the minimum payment every month to keep my credit score high. After I graduated I transferred the balance to a 0% interest card and started doubling and tripling my payments. As of November I’ll be completely free of credit card debt forever. I don’t plan to carry a balance ever again. To me, the interest I’ve payed is a small price for such a valuable life lesson.

Despite my decision to stay away from credit, my husband and I just acquired a new card in May that we use regularly. Why? At the time we were planning a road trip back to our home state of Indiana to get married. We’d carefully constructed a budget months in advance, but we didn’t planned on gas prices skyrocketing to $4 a gallon in May.

To save a little money, we decided to get a BP credit card to charge our gas expenses. The card carried a 10% rebate for the first 60 days, which meant that we got $30 back on the $300 we spent round trip to drive from North Carolina to Indiana to Washington D.C. and back to North Carolina. Basically a free tank of gas.

We continue to use the card for gas even now that the rebate rate has lowered to 5%. We never ever carry a balance, so we never pay interest. The 5% rebate would obviously be pretty silly if we paid a high interest rate. However, because we pay it off every month, we pay 5% less for gas than the price at the pump.

It may not sound like much, but at $4 a gallon, it equals 20 cents per gallon. It lowers our gas budget by about $5 a month, or $60 a year. Since we never pay interest, I say why not save 5%? Every little bit helps.

I also like having our gas bill come once a month in a lump sum. It makes it easier for us to track our expenses and budget.

We choose to travel by car instead of air when we can to save money, so when we make the long trip back to Indiana at Christmas, we’ll automatically save 5% on fuel expenses for the trip.

In most cases, opening a credit card for the “rewards” is a terrible idea. No matter how much you promise to be responsible (“I’ll only use it for groceries and pay it off every month just to get the frequent flier miles”), it almost never works out that way. You spend more than you should or end up charging more than you can afford to pay in a month and the interest starts accruing. But with a gas card, it’s easy to avoid charging unnecessary items or overspending. We don’t consume more gas just because we’re charging it. In my opinion, this is the one case where a credit card rewards program makes sense.

An added bonus: BP offers the option to donate your rebates to the Conservation Fund to help reduce your carbon footprint. We’ve only received one rebate so far (you can only get them in $25 increments), and we requested that rebate in a check to offset the overage in our budget that resulted from $4/gallon gas on the trip. But I like having the option to donate my rebates in the future.

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Back on track after a minor derailment

I have to admit, when I finally found a full-time job two months ago, my husband and I temporarily lost sight of our goals. It started with a celebratory dinner, which we had been planning since I started the job search process. But then we found our financial plans quickly derailed by several dinners out per month, some out of control shopping trips, and a general spending craze.

For the first time in a year, we were making enough money to cover our expenses with a little left over, so we succumbed to the urge to spend more. That was exactly what I wanted to avoid, but it’s a tough temptation to resist. It was easy to spend less when we had no money to spend; it’s a little harder to make the right choices when you do have extra money.

I also partly blame a “honeymoon mentality” that extended beyond our actual honeymoon. We agreed that we could afford a little extravagance on our honeymoon because we’d worked hard to save and we’d chosen a frugal destination (Washington D.C.) for our trip. We were only gone for a week, but I was hired at my job the week after we returned, and the extra income paired with the temporary lapse in frugality was enough to bump us off track.

Now I’m looking at our finances and realizing that even a full-time salary doesn’t go as far as you’d like without proper budgeting and goals.

With a new income, new budget, and new goals, I feel like I’m starting all over again. For the past year, the goal has been to keep from financially drowning without feeling financially deprived. Now we’ve got the opportunity to make real choices with our money, and I’m feeling a little overwhelmed.

I’ve updated our budget to include additional debt repayment and savings that we couldn’t afford before, but now it’s balanced with nothing left over. I need to find a way to magically find additional money to put toward debt and savings if we want to reach our goals, so my first step is finding ways to cut back on spending we can control.
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Getting started …

After almost a year of lurking in the personal finance blogosphere, I’ve picked up some great advice and finally feel like my husband and I are on the right financial track.

It’s taken me this long to start my own blog because I didn’t really feel like I had much information to add – I still have so much to learn! But I think it’ll be good for me to get my goals in writing to keep me honest and on the right track.

I originally got into frugal living when I moved to a new city with my fiancé (now husband) right after we graduated from college a year ago. He’s in grad school earning a small living stipend as a teaching assistant, and I struggled to find an entry-level job in the stalling economy.

When I finally settled on a temporary part-time job, I realized that we weren’t making nearly enough to maintain our lifestyle. The savings we’d built was quickly depleting. I didn’t want to feel deprived because, honestly, things were pretty bleak at the time. While I didn’t want to increase our debt by living above our means, I did want to live well and live healthy. So I started looking for ways to cut our spending without sacrificing our comfort too much.

What have we accomplished in the past year?

For starters, we kept our heads above water and avoided the dreaded paycheck-to-paycheck lifestyle despite our low income.

I’m also proud to say that instead of increasing our debt, we’ve paid off about $4000 in credit card debt left over from college. (We’re scheduled to make our final credit card payment in November.)

We paid cash for a beautiful wedding with a $5000 budget thanks to our own savings and help from our parents. We also went on a lovely frugal honeymoon in Washington D.C. where we enjoyed free admission at the nation’s museums and landmarks. We spent a little over $1000 on the hotel and food (also paid in cash from savings).

We’ve saved about $2000 in a high-interest ING account, and I’d like to see that grow now that I’ve finally found a full-time job.

What are our goals?

Now that I am working full-time, I’m faced with some tough decisions about how to use the small amount of extra income that we have. The last thing we want is to fall into the spend-all-you-have trap.

Some of our goals include:

  • Paying off a significant chunk of student loan debt.
  • Building and maintaining an emergency fund.
  • Starting a retirement account in the next year or two.

I’d like to make headway on our emergency fund, savings, and student loan debt before I start a retirement account. We’re only 23 and 24, so I think we’ve got a little time, but I want to begin contributing to a retirement account by the time we’re 25. My employer doesn’t offer a 401K, so it will be an individual account. I’m fine with that because I’d like to keep the bulk of our retirement savings in a Roth IRA anyway.

Most importantly, since we’ve only been married two months, I want to start developing good money habits now when we don’t have much. My main goal is to live comfortably and well without spending every penny that we earn.

I’ve lived above my means through credit card spending, and that certainly wasn’t what I’d call living well. I was constantly stressed about money and never had extra money without putting myself into more debt. If we can get ahead of the game then we’ll have extra money, less stress, and a richer life (though not necessarily more “stuff”).

I like to think that if we can do that at our current income, then we’ll be able to maintain those good habits as we start to make more money. In the future, I want to devote the majority of our income to savings and cash purchases and avoid excessive debt.