At the start of a new year, many people set resolutions for themselves.  I see these people at the gym every year.  This coming Monday after work time, the gym will swell with new faces and hopeful aspirations for rock hard bodies.  Precisely two weeks later, like clock-work, the gym will resume to it’s usual size with it’s usual suspects.  Only a rare few from this sudden influx will actually stick around. 

What can these observations from fitness world tell us about the financial world?  Resolutions don’t work.  I think they are worthless.  Usually I make stupid resolutions that are bound to fail… I resolve to eat nothing.  I resolve to rule the world.  I resolve to make a fortune this year.  Nope, those didn’t work. Instead, I am much more fond of goals.  Goals, unlike resolutions, set progress mile markers.  Goals are the vehicle toward your future, not the destination.  While I may want to be filthy rich, this is not a good goal.  A good goal would be to increase my income by 20% and decrease my expenses by 10% this year.  That goal is attainable, definitive, and calculable.  This goal puts me on the road toward being wealthy. 

However, even though this is a good goal I can’t just say my goal is an overall net increase of 30% and be done with it.  We can’t pat ourselves on the back and expect that come next year, this will be done simply because we will it.  No, we must plan plan plan.  Think about what smaller steps are necessary to reach that goal.  What are the ways in which we will increase income and decrease expenses?  Each smaller step under our main goal may need several baby steps. 

Then, once we have all these steps and sub-steps and baby-steps we can place self-made deadlines.  For instance, If I want to increase income by 20% in one year, it might be a good idea to decide I need to increase it by 10% by the year half-point (June).  Now, suddenly I have a sense of urgency.  When I needed 20% by January I could put it off, work on it later.  But once I give myself a deadline of June, I feel like I need to get this ball rolling.

As an example, here are a few of my 2009 goals with their corresponding steps.

Goal 1: Finally be Debt Free (minus the mortgage)
Step 1: Pay off Student Loan (Deadline: April)
Step 2: Pay off Car Loan (Deadline: December)
Step 3: Vow to never buy things I can’t currently pay for in cash.  And follow through. (Deadline: Ongoing)

Goal 2: Save for Retirement
Step 1: Max out IRA contributions (Deadline: October)
Step 2: Research moving to Vanguard (Deadline: March)
Step 3: Make move to Vanguard (Deadline: June)
Step 4: Create my own diversified portfolio after thorough research (instead of using a targeted retirement fund) (Deadline: December)

The Art of Nonconformity has a great excel template to put your goals down on electronic paper and review how far along you are periodically.  I love this template, it really got my gears turning and inspired me to fine-tune my goals.

We’ve all been hearing the doom and gloom from Wall Street and Washington for weeks now. At first, I didn’t let it bother me. I thought it would only affect people with sub-prime mortgages or maybe those using credit cards to live. To be honest, I don’t personally feel this recession. But as I continued to listen to politicians and analyst tell me this is as bad as the great depression and that this has yet to hit Main Street, I began to question how this would affect me.

While listening to all this doom and gloom coverage one morning I heard that Warren Buffett is making 10% interest off of General Electric. So GE is paying 10% interest. Can you imagine what average Americans will now have to pay for credit interest? I can see how anyone getting by from month to month using a credit card to fill the gaps is going to have a problem. However, that still left me wondering about people who don’t use credit cards, unless paid in full each month?

Then last night I watched Suze Orman, and she broke it down for me. Since there is less capital in the economy and less credit to go around, not to mention the fear that no one will pay their credit, the average American will see their credit limit decrease soon. There will be a freeze on credit limits, and in many cases we will get one of those long legalease letters that has in it’s fine print that the credit limit on the card has been decreased. For people who are using these cards and not paying them off, that means you may be at your max. Even if you are not at your max, your debt to credit limit ratio will now be higher, thus affecting your FICO score, and thus raising your car insurance premiums, making it even harder to get a loan, and generally giving you a gray financial cloud above your head.

My main concern with this crisis is the loss of jobs. Loosing a job would make finances hard for just about anyone. Unemployment is scary, even with an emergency fund. Personally, I am trying to spend less than usual and save even more lately. My hope is that this now $800 billion dollar bail out/pork barrel bill will at least save American’s their jobs.

The good news is that from everything I can find, it is possible to buffer yourself from this type of crisis through good financial planning. Getting out of debt, saving an emergency fund, diversification- all of these things that make good financial sense during normal times are doubly good during a crisis.

Last year I used credit card points to pay for about half of our honeymoon flight. It saved us about $650. Not bad for doing basically nothing. This year, we would like to return to our honeymoon spot for our anniversary. The problem is, with gas prices up and food prices up our flight ticket price is up about $100 per person and our all inclusive hotel rate is up $350 per person, per week. So, we are looking to our credit card points to once again save on this trip.

I mainly use 2 rewards credit cards:

• 

  Citi Professional Card with Thank You Network.
  With this card I get 3 Thank you points per dollar at restaurants, gas stations, and office supply. Everywhere else I get 1 point per dollar. Zero annual fee.




• 

  American Express Business Rewards Gold Card.
  With this card I get 1 point per dollar. But there are other benefits to this card including travel options and higher point to reward conversion. Also, I don’t pay an annual fee on this card.

When it comes to travel rewards, the American Express wins hands down. Why? Well it actually requires slightly more points to buy the same flight through American Express than through Thank you Network. However, it is highly unlikely and close to impossible that we will accumulate the 300,000 some odd points to purchase our flight tickets. So, we will need to partially pay with points. This is where American Express is awesome.

Partially pay with points. American Express lets you use up your points and then pay for the rest with your American Express card. The amount you pay is pretty comparable to what you’ll find on the internet. So we can easily set a goal to pay for 1/2 with points and 1/2 with card that is paid in full at end of month. On the other hand, with Thank You Network, you must purchase Thank You points to fill the difference between what you have and what the flight costs in points. And these points aren’t cheap. So we would be paying much more than the face value of the tickets to purchase additional points required.

But you may be wondering about 3:1 ratio for restaurants, gas stations, and office supply with the Citi card. Since we already have a sizable balance of Thank You points we are going to use this ratio to our advantage. We will use the Citi card for purchases that fall into this category. In the end, we will use these points to partially pay for our hotel. But we will get around the partial point fiasco by using a Statement Credit. We will put the hotel room on this card, and use Thank You points to get a statement credit toward the hotel room. The statement credit is only a .07% reward, but with the 3:1 ratio, it works out in our favor.

By using these 2 cards to our advantage we are hoping to save about $850 on our trip.

If you aren’t interested in travel rewards, The Digerati Life has a great post on Cash Back Credit Cards

The Federal Reserve has proposed new rules that would actually help the consumer (you!) in getting out of credit card debt. You have until August 4th (next Monday) to submit your public comment on the proposal and hope to sway the decision of the all powerful Federal Reserve. Word is, they will decide on the proposal by the end of the year.

A brief overview of the proposed rules:

• Credit card companies couldn’t increase your rate on the balance you already have and they must allow you “reasonable” time to pay off the balance.
• They couldn’t apply your extra payments only toward your balance with the lowest interest (I HATE the way they do that!) This one would help out everyone who has special low interest rates on part of your balance.
• They couldn’t use the “two-cycle” method, which basically charges you interest on what you have already paid off. (Read How Two-Cycle Billing Works)
• They need to give you a reasonable amount of time to make your payments. My husband had an evil Citi Personal Loan that would continually send him the payment stub on the 2nd or 3rd of the month when it was due on the 5th… AND you couldn’t make online payments… AND pay by phone was an extra $5…. AND if you didn’t use their exact payment stub your payment would get lost in their system, trust me, we tried.

In addition to the Federal Reserve proposal, several legislatures are trying to take a stand against the credit card companies with bills that help the consumer. Rep. Carolyn Maloney of New York has created the Credit Cardholder’s Bill of Rights. Some of the items in the Bill of Rights resemble the proposal, and then takes it a bit farther to give the consumer more power. Sen. Christoper Dodd of Connecticut also has legislation that follows the proposal and adds a few more rules, like not allowing them to charge a fee to pay over the phone (hint - Citi).

Overall I think it is good that the economic turbulence has at least shined a spot light on some of the poor practices of credit card companies and mortgage companies. Maybe this unfortunate down turn will outcome in greater consumer rights and power. Power to the people, and stuff like that…

To read about the Federal Reserver proposal: Fed. Reserve Proposal
To submit a comment about the proposal: Comment on Proposal
To read about Rep. Maloney’s Bill of Rights: Credit Cardholder’s Bill of Rights
To read about Sen. Dodd’s Legislaton: Sen. Dodd’s Credit Card Reform

Mint.com is a website that allows you to track your financial accounts online. In order to use Mint you have to enter in your log in information for financial accounts (banks, credit cards, loans) into the website. There is some controversy about wether sharing your login passwords and security questions is a good idea or not. Of course, if the site was hacked, everyone using it would be in trouble. However, the same is true for any other website you shop with online. Getting past the worst-case-scenarios of identity theft, lets look at the site for it’s features.

Features I like:
• The design is great, I’m a sucker for all things slick and ajaxian.
• Trending. I like the ability to view pretty pie charts of where all my money is going. You can also easily set sliding date ranges for the pie charts.

• Budgets. You can set budgets for categories then the software auto-categorizes to tell you if you are over-spending on categories. Of course it shows you that you spent entirely too much on donuts last month in a pretty bar graph that is oh-so-slick and dynamic.
• Alerts. You can set up alerts that can send to you an email or text message to your phone when an account hits a set low, or when your bills are late, even if your interest rate changes.

The problem with Mint.com is that there is another site (the behind-the-scenes code for Mint) called Yodlee that is much more robust. Mint only has a limited number of financial institutes linked in and doesn’t have all my financial accounts available, whereas Yodlee has every single one. Yodlee lets me track and trend things with more accuracy and options. For all Mint’s slickness, it is a pain in the ass to edit a transaction’s category. And creating category rules that actually work, is also more cumbersome in Mint. Now, Yodlee can’t compete with Mint as far as design- the site is new and on the cutting edge of web apps. But when it comes down to my finances, I don’t want pretty. I want fast, usable, and robust querying of my data. So I’m sorry Mint, but your cute-as-a-button design just doesn’t make up for the features your big brother Yodlee offers.

Rating:

One financial blunder I will never live down is opening a stupid bebe store credit card. They make it so enticing…you are about to check out, thinking about how much this will all cost, and they offer an oh-so convenient way to save 15% (or maybe it’s 10% or 20% depending on the store). I made this egregious mistake while I was in college and had no right to be spending $100 on a single piece of clothing at bebe! What you don’t think about when offered this one time discount is the interest rates this new card will now tax you with. You also don’t think about how much more money you will spend with the store simply because you have a branded card for the store.

Ever wonder why the stores offer you these cards? Retail stores aren’t in the banking business. They want loyal customers who come back time and time again to their store. Research has shown that if a customer owns a store branded card, they are more likely to return and to spend more at the store. Anecdotally speaking, this has been true for me. I got a Victoria’s Secret card, now I buy things from them JUST because I have a coupon if I spend $50 or because I get a cute tote bag with…the Victoria’s Secret logo plastered all over (great, now I’m their walking billboard).

But let’s get back to the bebe card. I opened the card while I was purchasing a skirt and a pair of earrings. The skirt was expensive but the earrings were on sale and only $8. So with my 10-20% discount I might have saved $10 that day. After I got home and tried on the skirt with my shirts, I realized I didn’t like it so I returned it. I was new to credit cards at the time, and I didn’t understand how returns worked on the credit card. So I get a bill for maybe $108. I call the phone number on the bill to ask about what to do since I returned the skirt and the bill should only be about $8. They told me they would send me another bill right away. Stupid me, I don’t know why I didn’t just pay the minimum payment (more than the cost of the earrings) and be done with it. Instead I let it linger, waiting for an updated bill, the skirt didn’t get removed, so on and so forth… (plus I was bad at checking the mail at this time, so let’s be clear- this was MY money mistake and not bebe’s). In the end they sent it to the credit bureau. After the dust settled they did remove the skirt from the bill, but only AFTER my credit score was dinged! I will forever refer to this pair of earrings as my $500 earrings because god know how much they actually cost me when you consider all the problems it caused. And all for a $10 discount!

The moral of this mistake: THINK before all your financial decisions, even the small ones can turn into giant hair-balls if you don’t use your brain.

Credit card companies are already raping you with interest rates. Why oh why would anyone want to say, “Here credit card company please take $X per year from me because I am a sucker. Thank you.”

Now, I have to admit that I am a credit card point whore…I’ll do anything for those little points, don’t test me. So I signed up for 2 American Express cards that had annuals fees just to get the points. However, they waived the fee the first year. So I diligently counted my months and right before time I called them and cancelled one and got them to remove the fee on the other.

Lately, American Express has been sending me letters every week about how I am “invited” (don’t you love the terminology) to fork over $400 of my hard earned money every year for a super-shiny, ultra-exclusive platinum card. I get a good laugh at how they try to market these to customers by making you feel oh-so-special and playing to our natural desire to be better than those average folks with average credit cards. Then I swiftly throw the letter into the trash.

A few weeks ago my mom tells me she got a posh new card that has so many benefits. Of course, my poor mom fell for their gimmick. She’s only human and was particularly enticed by the offer that you get one free plane ticket with every ticket you purchase on the card. Oh, and did I mention you get to go into the airport lounge? Once again, pandering to our desire to feel special. I told her this was a bad idea, but she didn’t believe me. She said she would call me from the fancy-pants lounge with her mimosa in hand to tell me how absolutely fabulous it is. She was happy with her decision, until she found the catch.

Her platinum card didn’t get her a free ticket with every run-of-the-mill ticket she purchased, nope. She had to purchase a business class ticket to get the free one. And since business class is well over double the price of low-life-coach, this is really not a deal at all.

BTW- My mom isn’t the only one who fell for this, apparently Tina Fey did as well.

I often feel overlooked and underestimated because I am a woman in my field. It doesn’t help that I look younger than I am, and have repeatedly been mistaken for a teenager. So I decided one day that I wanted to read up on how other women over-come the gender difference, especially when it comes to making money.

In general, I’m skeptical of books about “secrets” and “millionaires” and “six-figures” and the like. But this one had good amazon reviews, so I gave it a try. And I am glad I did. The book tells you first what low-earning women do that sabotage their careers. Then it looks at what high-earners are doing different. I don’t think any of the ideas where new or groundbreaking, but the ideas were presented in a very inspirational way. After reading a chapter I felt energized and wanted to make the recommended changes, right away.

I liked the book so much, I recommended it to my mom, and plan on giving her my copy. It has the kind of information and inspiration that I want to share with all the women I care about.

The only negative I could see is that the book would best benefit women who are stuck as a low-earners. Women who have already achieved the six-figures or close to it, probably wouldn’t benefit as much. Also, there is a finance section in the book but it is very basic and merely an outline. Anyone looking for a complete solution for six-figures should also read about finance more specifically.

Rating:

I am obsessed with money. Not in the way that I want/need more and more money, but in the way that I track every penny in and out, analyze purchase decisions to the nth degree, and thinking about the money I’m saving makes me giddy with delight. I was not always this way though.

When I was young, my family lived outside of our means. I share in the blame because I always wanted the best toys, the coolest gadgets, and most fashionable clothes. My step-dad was a CPA/CFO and was the most intelligent man I ever meet. However, intelligence and knowledge of money systems does not inherently make one money smart. He was constantly shuffling money around to meet all the bills and debt. He probably knew better, but maybe he just wanted to keep my mom and me happy and didn’t want to let me know we were in trouble.

When I came home the first weekend holiday (Columbus day to be exact) after starting college, he died. Dealing with the death of a loved one is hard enough. Financial crisis only makes a difficult situation all the more impossible. He had no life insurance. We had a mortgage, and a second mortgage, and a mortgage on the rent house, and credit card bills, and debt, and more debt, and more credit card bills. I spent the first few days after he died calling all the credit card companies in his wallet. Trust me when I say you never want to leave your family with that kind of mess. He didn’t mean to, but it happened. My mom and I went from middle-income, living beyond their means, everything is fine… to poverty level.

How did I cope? Well at first I went to the mall. I tried to feel better by buying pretty clothes, a new set of makeup, a new pair of shoes might do the trick. Then when I moved back home to go to college, I rented the luxury gated apartment, needed a new car. My theory was that I was already in the red, and when you see no end of debt in sight, what harm can more debt possibly do?

This story isn’t all bad though, things did eventually turn up. All my dad’s debt eventually, and painfully, got squared away. My mom became brave by quitting her low-paying state job and taking the plunge into a new, blooming career that allowed her to be independent and not rely on a husband. Me, I meet my husband, and he inspired me by teaching me a bit of frugalness. Although, he had no idea at the time the kind of monster he had created with a little bit of budget inspiration. Along the crazy, wild-ride way I have learned first and foremost that money does not make you happy, it does a lousy job at filling emptiness, and it can bring out the worst in people. However, with proper planning, budgeting, and saving, money can make life easier, less worrisome, and more secure.