I heard someone tell me that they don’t need an emergency fund because they have enough cash advance credit limit on their credit cards to use them as emergency funds. While the statement can be true, it is a response of a typical financially irresponsible person. The general rule of thumb is to have at least 8-10 months of monthly expenses saved up for emergency purposes. Although I have $120,000 worth of credit limit, I would never use that as my go-to source of my emergency fund.

Using credit cards as emergency funds is a bad idea for 5 reasons.

1. Interest rates on cash advance transactions are super high. They range from 10% up to almost 30%. You’re essentially borrowing money at those rates.
2. There are fees associated with cash advance. Not only are the interest rates are high, you have to pay an initial transaction fee, which can be as much as 3% of the amount.
3. You incur debt. Debt is not a good thing. You should avoid debt at all cost, especially of the credit card variety. I believe our government is excellent at this practice with ever so increasing debt ceiling. Don’t follow suit.
4. Learn good savings practice by actually saving money. Learn to become financially responsible.
5. Credit scores go down. Your FICO score is heavily based on your utilization rate. If your debt to available credit limit is higher than 30%, your scores will suffer.

Bonus – Readers’ Additions

1. It takes a lot longer to pay off a credit card at huge interest rates than it does to replenish your emergency fund should you need it.

So, be responsible and start saving for emergency funds. Don’t use credit cards.

photo: emergency, David Shankbone

I’m no dentist but not going to see your dentist every six months is just plain dumb. As part of my health benefit at work, I receive dental coverage as well. It allows me and my wife to go see our dentist and receive cleaning every 6 months without requiring any additional payment. It’s the easiest way to have my teeth taken care of, aside from regular brushing and flossing.

But I still know a few people who have not seen their dentist in years! I would understand and be more sympathetic if they didn’t have dental insurance (my dentist charges $100 for cleaning), but these people HAVE dental insurance AND don’t bother going. I can’t think of any other excuse except simply laziness.

What happens if you don’t go see your dentist regularly?

• You could have a cavity and not know it. It’s a lot easier to treat a small cavity and than big cavity. Drilling more into the tooth probably is not as good as drilling less. The sooner the cavity is detected, the easier it would be to patch it up.
• You could have gum disease like gingivitis and not know it. Gingivitis if left untreated can lead to periodontal disease, which can lesions, which can lead to tooth loss. Early detection from regular checkups can prevent advanced stages can save your tooth.
• You could have oral cancer and not know it. Do you know how to check for oral cancer? I surely don’t. But your dentist does. During the routine checkup, your dentist is also screening you for oral cancer.

By avoiding major teeth related procedures, you can save a lot of money by taking care of your teeth and receiving regular checkups every 6 months.

When was the last time you’ve seen your dentist?

This is the latest edition of our new series called MoneyFail.

photo: Dental Flossing, Walter Siegmund

We are now four weeks into the new year. How are your resolutions coming along? If you remember, I made a few resolutions to improve the quality of this blog by investing more time in different aspects of blogging. I don’t plan on providing updates every week for the next 48 more weeks, but on occasion, I will make a random update just to give myself some additional accountability.

You can refer to my previous new year’s resolution updates to keep track of my progress.

1. Generate more content – There were 13 articles posted through the first 4 weeks of the year. My goal was to generate 180 articles total for the year.  Right now, I’m on pace for 169. Not bad, but I  need to pick up the pace just a little bit.

2. Host Carnivals and weekly Roundups – I provided one roundup a couple weeks ago. This one here will be the second one. My goal was to provide at least 2 rounds ups and/or carnivals per month. I’m on pace so this is good.

3. Visit more blogs and comment more often – I’ve picked up the pace since my previous update. I’ve visited more blogs and provided comments and began to keep track of each of those comments. My goal was to visit and comment on 20 blogs every week for about 80 comments per month. So far, this month, I provided approximately 40 comments on various blogs. It’s half of what my target goal was so I need to be twice as active as I’ve been.

4. Get more involved with the community – This is a work in progress. I wanted to become Black Belt in Belts of Honor within the Yakezie community and provide four member posts to the community. I’m currently working on my first article of the year.

5. Be more active in social media – My goal was to make one additional tweet or status update for every article. I’ve been doing good on this one so far as well. I’ve been retweeting other bloggers’ tweets and updating facebook status with non-post links. Hopefully I can keep it up. You can follow me on twitter via @moneygreenlife and like me on facebook via /moneygreenlife

With that I’ll leave you with a few articles that I found interesting and fun to read. Hopefully, it’ll be just as fun and interesting to you as well.

The College Investor – Get a paper shredder to prevent identity theft. Not just any shredder, but the one that have at least a criss-cross cutting action.

One Cent At A Time – Don’t find yourself in a situation where you have to spend a ton of money when your car repairs go wrong. Learn these tactics to help yourself save  money with car repairs.

The Debt Myth – Need to budget your expenses? Don’t wait any longer and just force yourself to create one. It’s so easy!

Not Made Of Money – Learn to keep track of your credit card expenses so you don’t end up in huge debt.

Untemplater – Have you lost your wallet before? It feels horrible! Learn what to do if you lose your wallet to minimize theft and fraud. One thing always is to have a contact card in case the founder of your wallet wants to return it to you.

The Millionaire Nurse – What’s in your 401k? One million dollars in your 401k account is not out of reach. You can do it!

Retire By 40 – How do you compare to the average American in coffee, gas, pets, and beer expenses? Retireby40 summarizes it all.

Free Money Finance – I went to Costco couple weeks ago and they were offering free samples. I think I could have gotten a free meal from eating all the free samples at Costco. Or if you’re really ambitious, you can possibly save $2000 by eating at Costco!

MoneyGreenLife was also featured in the following carnivals:

Yakezie Carnival – Winter Wonderings via The Amateur Financier

Yazkeize Winter Round Up via Little House In The Valley

]]> http://www.moneygreenlife.com/new-years-resolution-update-2-with-link-love/feed/ 5 http://www.moneygreenlife.com/dave-ramseys-debt-snowball-method-is-not-the-best/ http://www.moneygreenlife.com/dave-ramseys-debt-snowball-method-is-not-the-best/#comments Fri, 27 Jan 2012 10:15:45 +0000 Charles http://www.moneygreenlife.com/?p=3632

By now, most of you have probably heard of the famous Debt Snowball method, developed by Dave Ramsey himself. The method is designed to help those in debt to get out of debt as quickly as possible. Personally, I think this is a great method with very high success rate and I support it 100%. However, it simply is not the most economical method to eliminate debt. You will often end up paying more in interest and will sometimes even take you longer than the traditional ways of eliminating debt.

Debt Snowball
You see, the debt snowball method calls for eliminating the debt that has the least outstanding balance, regardless of interest rate or terms of the loan. For example, if you have two credit cards with debt you want to eliminate, you would put maximum effort in paying down the card with the lower balance off first while paying just the minimum amount due on the other card. When the first card is finally paid off, then you would proceed in putting maximum effort in paying down on the remaining card.

The Debt Snowball method does not account for the interest rate at all. If Credit Card A has a balance of $5,000 with 10% interest and Credit Card B has a balance of $10,000 with 20% interest, it doesn’t make any sense to pay off credit card A first. But the debt snowball method calls for that. On the other hand, if you pay off Credit Card B first, then you will save more by paying less interest.

So, why does Dave Ramsey tell us to pay off Credit Card A first, the card with lower balance and lower interest rate in this scenario? Financially, it just doesn’t make any sense.

Financial Responsibility
It can be safely assumed that if you carry two credit balances that total $15,000 in debt, then you are a financially irresponsible person. A financially responsible person would not be put themselves in a situation where they would be in such a big debt, especially of the credit card variety. Additionally, in order to become debt free after putting yourself in debt to begin with, it requires even greater financial responsibility. You could apply for a free balance transfer credit card and transfer the balances to avoid paying interest for the time being, but without financial responsibility, you could end up worse than you were before. Odds would indicate that such person would not be able to come out debt by their own accord, without getting help from someone else. That’s where the Debt Snowball method comes in.

It’s All Mental
Debt elimination, along with other addiction like smoking and gambling requires a great mental advantage in order to become successful. You just have to force yourself to do it! Dave Ramsey insists that personal finance is 80% behavioral and 20% knowledge. With debt snowball, by eliminating the one with the lowest debt, the gratification of having some sort of success will come sooner, which will motivate you to keep going. In contrast, if the highest debt balance has the highest interest rate as well, it will take longer time before fully eliminating it. Not seeing the results right away may sway you into giving up prematurely.

It might be a bad example with only two credit cards, but imagine if you had 12 credit cards with debt in all cards. Trying to eliminate the debt all at once will be a struggle. But by attacking the card with the lowest balance first will result in a higher rate of success.

What are your thoughts on Dave Ramsey’s Debt Snowball method? Have you tried it? Does it work?

I got mad at my wife couple months ago when we received two speeding citations in the mail in one week. She was caught by a speed camera on two consecutive days as she was driving to her school destination. I told her to stop speeding! Then, I had to eat my own words when I received a speeding citation in the mail last week for going 69 in a 55 mph zone. I was also a victim of a speed camera. I apologized to my wife for yelling her at couple months back.

Our total fine for the three citations were $120, only $40 each. Nothing to go bankrupt on, but it’s $120 out of our pockets. It’s $120 that we can use towards something else, something that we need, like a new coffee table that we’ve been shopping for as of late. But instead, we had to pay the government for speeding above the limit. We didn’t even get a chance to talk our way out of the speeding tickets. We were definitely being dumb with our money. In Maryland where we currently reside, the total revenue from speeding cameras almost reached $77,000,000 in 2011. That’s a $77 million industry! Some 1.9 million citations were issued last year in Maryland. And that’s only in Maryland! That means, there’s a ton of drivers out there that are speeding like crazy and wasting money by getting caught by these speed cameras. Do yourself a favor and drive slower. Don’t be dumb with your money by driving too fast.

This is the latest edition of our new series called MoneyFail.

photo: speed camera citation, charles

Balance transfer cards can be godsend for those who have outstanding credit card debt, especially if the fee to transfer the balance is waived and the interest on the transferred balance is 0%. There are many good promotions out there that you can take advantage of today. However, along with everything else in life, it is vital that you make sure to read all the fine print before applying.

Zero percent balance transfer cards are helpful because you save money by not having to pay any interest on the balance. But at the same time, you need to be responsible and have a plan of attack in eliminating the credit card debt. Without a plan of attack, it could put yourself in a worse financial situation than you began with. That includes reading and understanding the fine print and adjust your plan of attack accordingly.

Fine Prints To Look For

1. Interest Rate After Promotional Period – During the promotional period, it’s zero percent (that’s why you signed up remember?). But after this period ends, all bets are off. The interest rates can go up as high as 22% or even higher. Discover® More Card – $0 Balance Transfer Fee provided the following fine print:

0% intro APR for 12 months from date of first transfer, for transfers under this offer that post to your account by July 10, 2012. After the intro APR expires, your APR will be 10.99% to 19.99% based on your creditworthiness. This APR will vary with the market based on the Prime Rate. (emphasis added)

Similarly, Citi® Platinum Select® MasterCard® had almost identical fine print:

0% introductory APR for 21 months from date of account opening. After that, your APR will be 11.99%, 16.99%, or 21.99%, based on your creditworthiness.  These APRs will vary with the market based on the Prime Rate.

Because the interest rates are so high after the promotional period of 0% on balance transfer, it is vital that you do not have any balance when the 0% period expires. Either pay off your balance or transfer to another 0% balance transfer card.

2. Penalty For Late Payment – Understandably, taking advantage of this promotion requires the user to be responsible with the payments. If there is a single late payment, there will be a severe penalty APR that is much higher than the normal APR. Discover Card had the following in their fine print:

From up to 15.99% to up to 24.99% based on your creditworthiness and other factors. This APR will vary with the market based on the Prime Rate. This APR may be applied to new purchases and balance transfers if you make a late payment. If your APRs for new purchases and balance transfers are increased for a late payment, the Penalty APR will apply indefinitely.

In addition to this penalty, the credit card also holds the right to end any introductory APR on purchases and balances when a late payment is made. So, be responsible and not be late with any of your payments. Should you find yourself in this predicament, one thing you can do is give your credit card company a call and request a waiver on the penalty interest rate. They may or may not accommodate, but the worst thing they can do is say “No”.

Have you been burned before for not reading all the fine print when making a purchase or applying for something?

photo: charles, my credit cards

If you lost your job today, would you be okay financially? If you’re like millions of other Americans, you’re probably not financially equipped well enough to handle the sudden loss of income. I recently discovered that a friend of mine recently quit her job due to high stress and overwhelming hours. She quit without having any other opportunities to fall back on. However, she is fortunate enough that her husband still brings in the bulk of the household income so she is in no hurry to find another job. Many other Americans who have recently lost their jobs can not say the same thing about their situation. Sadly to say, they need to adjust to the new circumstances.

Things To Expect After Loss of Income

Cut Expenses. Money will probably tight if you’re in this predicament, so you will need to cut down on the some of the things that came at a leisure. Cable tv might be one of them. If you have internet and cable, that can run you almost $100 every month. By canceling both, the savings will add up over the months. For free internet, you can go to internet cafes which are becoming more widespread these days. Also, public libraries now offer free internet to visitors.

Be Productive. Work on your resume and submit them to job sites every day. One friend who lost his job last year spent hours in the library, researching and submitting resumes. He just seemed busy all the time, every day. I was impressed that he was very so diligent and active in his job search.

Find Temp Jobs. Keeping yourself busy and occupied is very important. Many hiring managers actually do not like to see any gaps between jobs in resumes. They want to see that you have been active and productive even during the times of unemployment. Working part-time or as a temp can fill that void and also bring in some income while you need it.

Protect Yourself From Job Loss Now

Emergency Fund. You can create a fund for emergencies. Whether it’s for unexpected car repairs or health-related costs, having a fund for emergency purposes can really bail you out of a tough financial spot. Losing your job definitely fits in this category as well. Calculate what your normal monthly expenses are and try to maintain about 8-10 months of savings in the emergency fund. That way, you will have 8 months to find a new job if you were to become laid off. Although unemployment rate has been decreasing as of late, the average unemployment length is still around 8 months.

Gather Contacts. I’ve collected so many business cards over the years working professionally. I still have contacts from my first job 10 years ago. If I were to lose my job tomorrow, I can always use some of these contacts to inquire about any job openings. Save those business cards and keep them safe.

Diversify Income. If you only have one source of income, then you’re not taking advantage of all the resources that are available to us. There are so many ways and methods to earn a few dollars using the internet. So you can start an online business such as a blog. MoneyGreenLife.com has been a nice supplemental income for my household over the past couple years of its existence. Also, my wife will finish school in May, 2012 and will start working soon after. The secondary income from her will also help.

Have you been in this tough spot lately? How did you handle it? What lessons did you learn?

photo: morguefile.com

If you don’t like free money, then you can stop reading now. This article is not for you. But if you do like free money, I have one piece of advice for you. Enroll in your company’s 401k program now! With a company match, even if your balance doesn’t accrue any additional earnings from investments, you will still come out ahead. Not participating in 401k is simply foolish. I was foolish a few years ago when I decided to opt out of enrolling in the company 401k plan and I regret it to this day.

I bought my house in March 2005. But since it was in the process of being built, I didn’t have to make any down payment until it was complete. I had about 18 months to accumulate as much savings as possible to come up with 20% down payment. That’s when I decided to opt out of 401k program so I can pocket that amount instead. Back then, my gross salary was around $50,000. My company’s 401k program allowed us to contribute 6% of our salary and they would match 100% of it. Any additional contribution from my end would not be matched. So in 18 months, by not contributing to 401k, I had an extra $4,500. But it was actually less than that because it needed to be taxed. So I actually took home around $3,000.  It turned out that I didn’t need this money as part of my 20% anyway, so the effort was wasted.

How Much Money Did I Lose?
Had I enrolled in my company’s 401k program and contributed 6% to the account, I would have had $9,000 including the company match at the end of the 18 month period. Now this amount does not account for investment returns I would have had during that time. At an annual historic average return of around 10.5%, that $9,000 would now be close to $15,000 today. That’s a difference of $12,000. If I carry this number to another 30 years, it would be at an astounding value of nearly $300,000!!

To simplify the math, I assumed $9,000 at the start of January, 2007. That was 5 years ago. At 10.5% annual return, that’s how $15,000 and $300,000 came about.

$9,000 x (10.5%)^5 = $14,827 after 5 years

$9,000 x (10.5%)^35 = $296,430 after 35 years

Don’t be like me and be dumb by ignoring your company’s 401k program. By wanting to pocket $3,000 a few years ago, I will have lost $293,000 by the time I’ll be ready to retire!

Ok, I’m depressed now.

This is the latest edition of our new series called MoneyFail.

photo: morguefile.com

After I had signed up for my 12th credit card, I needed a spreadsheet to keep track of all of them. I needed a document that included all the due dates of each of the credit cards. There’s no way I would be able to remember without writing them down somewhere. So now that each of these credit cards billing cycle is coming to and end, I had to link my accounts to my checking account so I can easily make payments online. The process for doing this was very simple. All I had to do was get my checkbook out and enter the bank name, bank routing number, account number, and my name on my bank account and it would be linked almost instantly. Some accounts required 3-4 days to confirm that account. Then it got me thinking. I could have entered anyone’s information and it would have worked! If I had a copy of someone’s check, every single piece of information required to link it to my credit card account is on the check!

Will this work? Can someone else use one of my voided or used checks and steal my money, or even steal my identity? The quick answer is YES, but it’s not likely.

Although only a few information is required to link your checking account, they do go through a series of account verification process which may include permanent address, social security number, and date of birth among others. Since your credit card company and your checking account issuing bank already have this information, the process of verification and confirmation will be easy and quick. Sometimes, in addition, the credit card bank will make two small deposits to your bank account to verify that it is indeed your bank account you’re trying to link to. They will take away the two deposits after the bank is verified and confirmed.

Avoid Identity Theft
Identity thieves make a living by stealing personal information from people and using that information to open new credit or to make loans. If they get access to your social security number, name, address, and date of birth, then they can steal your identity. Over 10 million Americans every year are victims of some sort of identity theft. So be cautious with your information and make sure you just don’t leave them anywhere. To avoid your identity from being stolen, follow these steps always:

1. Opt out of paper statements. I like to do all my banking online and opt out of paper statements. That way, I don’t have any paper trail of any documents that could expose my personal information. I just look at them online and be done with it. If they send me documents, I either store them away securely or shred them completely.
2. Get free credit report every 4 months. There are three major credit bureaus and every person is allowed one free credit report from each of these bureaus every year. For example, you can request one free report from Experian in January, Equifax in May, and TransUnion in September and repeat this process every year. Make sure there aren’t any unusual account openings in each of the reports.
3. Never click on email links. Phishing scams are become ever so popular and it’s gaining in popularity because it’s working. Scammers are becoming more clever to entice you to give them your information. When you receive an email from your bank or credit card or any other personal accounts, and they ask you to click on any link, don’t do it. Always type in the URL directly using your browser.

Avoid Credit Card Fraud
Thieves are also stealing through credit card frauds. By definition, if an unauthorized user is using a credit card that does not belong to them, they are committing a credit card fraud. If a transaction is made using your credit card and you did not authorize it, it’s credit card fraud. Follow these tips to avoid becoming a credit card fraud victim:

1. Only carry 2 credit cards with you at any given time. I have 12 credit cards and if I carried them all in my wallet and lost my wallet, then I would find myself in a nightmare situation. Someone had left their wallet at my church this past Sunday, with driver’s license and 5 credit cards. No one knew who he was and I’m not sure whether he recovered his wallet or not, but I’m sure he is/went through hell because of it.
2. Don’t peel off the activation sticker. If your wallet is stolen and the thief sees the activation sticker on the credit cards, the chance of them not using the credit card is increased. It’s not foolproof but it could act as a deterrent.
3. Check your accounts regularly, at least once a week. Sometimes, when a credit card is lost or stolen, the victim doesn’t realize it until it’s too late. When I lost my two credit cards at once one day, I didn’t know until I received a fraud alert phone call from both my credit card companies. Check your accounts regularly and make sure there are no unusual transactions made. Sometimes, thieves will make small transactions to make sure the account is still active before making big ones.

Were you once a victim of identity theft or credit card fraud? How did you handle it?

MoneyGreenLife.com was featured in the following carnival: Yakezie Carnival – Credit Cards Edition

]]> http://www.moneygreenlife.com/can-my-identity-be-stolen-using-information-on-my-bank-check/feed/ 1 http://www.moneygreenlife.com/how-to-take-advantage-of-zero-percent-balance-transfer-credit-cards/ http://www.moneygreenlife.com/how-to-take-advantage-of-zero-percent-balance-transfer-credit-cards/#comments Thu, 12 Jan 2012 16:49:23 +0000 Charles http://www.moneygreenlife.com/?p=3464

Zero percent balance transfer credit cards can be a good way to save money. If you have a big balance on any of your current credit cards, transferring the balance over to a zero percent credit, the savings from not having to pay high interest can really add up. If you have $5,000 balance with 20% APR on your credit card, you can save up to $1,000 in interests alone in one year. I’m sure you think of quite a few ways to spend that $1,000 elsewhere.

How Does Zero Percent Balance Transfer Work?
Depending on the credit card, there’s a balance transfer fee, typically anywhere from 3-6% of the transfer amount. So, if you’re transferring $5,000 over to your new credit card, the fee can be $60-120. If there’s no balance fee, then it’s completely free! That’s all there is to it. There’s no catch!

Things To Be Wary Of
Although the interest rate on the balance transfer is zero, that’s only during the promotional period. After this promotional period ends, the APR will return to the normal rates, which can be as high as 20%, sometimes even higher. So be cautious of the length of the promotional length and also the post-promotion APR. If the promotional period is less than 12 months, I would stay away from it and look for other competing cards. Make sure you read the fine print before applying for any cards.

Be Responsible
With any credit cards, if you’re not careful, you can put yourself in great financial danger. Don’t just sign up for a zero balance transfer credit cards without a game plan. Always have a purpose and goal and always stick to it. A friend who made plenty of mistakes after became debt free. During that time, he took advantage of such credit card. He accumulated a pretty decent credit card debt over the years and was looking for ways to help him pay it off quicker. Once he transferred all of the balance to his new credit card, he “forgot” about the purpose and reason when he realized that the interest on his new balance was 0%. Instead of making payments to reduce his debt, he made minimum payments and pocketed the rest. All of sudden, he had “extra” spending money. After the promotional period ended, the normal interest rate kicked in at 20.99%, higher than his previous card. Had he stuck with his original plan, he could have been credit card debt free by the time the promotional period ended. Instead he was back to square one and a year wasted.

Current Promotions
There are a few good current  promotions going on right now. Do your own diligence and make sure the card you choose is the right card for you.

• Discover® More Card – $0 Balance Transfer Fee!- Not only will you save money from 0% interest, you will also save money from not having to pay any balance transfer fees with this card. 0 fee on balance transfer and 0% APR on balance transfers for 12 months. Also enjoy 0% APR on any purchases made with this card for 12 months as well! There is no annual fee with this card. For your information, there are a few variations of the Discover More Card. To ensure you receive this promotion, please click on the link provided. When you go to Discovercard.com website directly, all the promotions are not clearly outlined and you risk of signing up for the wrong card.