Stimulating Pixels

I think I’ve written before about the fact that I use a “virtual” credit card number for my purchases on the internet. The way that this works is that I log into my credit cards web site and launch a tool from there (that I also have to log into) that creates a new number for me any time I want. The charge goes to my regular credit card, it’s just a one time use number that’s tied into my account.

The tool has a way that you can download and install it directly on your computer so that it ties directly into your browser. With this, it’ll pop up and just require you to log in once then automatically fill out standard purchase forms for you. I actually prefer the web version one. It take a few minutes to go all the way through the process, but I think this is a good thing. It’s a little bit of a pain to do, which means that it’s much harder to buy things on a whim.

I really got to thinking about this the other day when I saw one of the Visa Check Card commercials. The ad is really saying, you should consume as fast as possible. Literally, the tagline at the end is “Life takes faster money”.

Consume, consume, comsume. Faster, faster, faster. And for heaven’s sake, don’t stop to think about it. No wonder our national debt has grown to $9 TRILLION.

Speaking of buying with cards, here’s one more Dave Ramsey plug. Apparently, if you use a credit card for your purchases instead of cash, the average person will spend more money overall. Ramsey says 12-18% more. I don’t know where he gets that number specifically, but I’ve heard similar things before. He’s got a page on The Truth about Credit Cards that’s a good read.

On the flip site, Citigroup stock is close to a 4 year low right now. Probably worth looking into buying a little if you have some money to invest. Even though they are getting hammered right now, over the long term, I’m betting they will make it back up.

The one credit card I have has a feature where you can turn on various email and/or phone text alerts. The options include the ability to get your daily, weekly or monthly balance. My question is why don’t they set one up that will shoot a text message to your phone every time there is a charge to the card. It would be a great way to help fight fraud. If your sitting at work and some random charge comes thru, you would know to call the credit card company immediately and let them know that it wasn’t you. Depending on the speed of the charge, it would be really easy to immediately call the store where the charge was made and see if the person is still in the store. While this is unlikely, it would happen from time to time. It would make it really easy to pull security tapes from just a few min before and find the person as well.

Of course, they don’t offer this service, just a daily account balance.

My main credit card expires at the end of the month and I just got the new one in the mail today. It expires 10/10…. As in 2010. I mean, I know that year is close, but the fact that I’ve got something now that is specifically tied to that year (and way late in that year) is a little wild. While I don’t expect us to have shuttles to the moon base and insanely smart (and just plane old insane) AIs by then, we do have some pretty cool shit. Like HDTV which makes football games even more awesome to watch when you aren’t at the stadium.

Another interesting number on the card is the “Member since”. For me, that number is 1994. I graduated high school in 1993 and start college in the fall of the same year. I can’t remember exactly, but I think that I actually signed up for the card late in my first semester, but didn’t get it till January of 1994. I’ve mentioned before that like a lot of people, I had no idea how to properly handle a credit card at that point. I quickly maxed it out and was just paying the minimum each month until they would bump my credit line up a bit in a few months. Rinse, repeat.

1994 means that I’ve had a credit card for well over 1/3 of my life. Luckily, I figured out quicker than most how important it is from both a financial and basic mental health perspective to get to the point that I wasn’t carrying a balance from month to month. I don’t remember exactly when, but it has probably been eight or nine years since I had a monthly balance that I couldn’t pay off. I’ve had a good job for several years now, but I think that it’s important to point out that I actually got to where I was paying off the balance each month while I was still in college.

It’s a critical point that the reason I was able to get out of credit card debt was not because I got a good job, but because I figured out at some level how I was wasting a ton of money by paying interest to the credit card company and cut down my spending to the point where I could chip away at the debt until it was paid off.

Before this clicked in my brain, I went thru two other credit card paradigms. The first was after I first got my card and it was just a neat way to get stuff (mainly photo stuff) without it seeming like it was costing me extra. It felt like, I could simply get something that I wanted and then pay it off over time. While this is, of course, true at the top level, the fact that I was paying interest for this priviledge and exactly how much that interest was costing me were way below the surface of my thinking.

The second major thought pattern happened when I started to realize how much I was paying in interest. From that point, I start to rationalize that the reason I was in debt was because I was a poor college student and that when I got out and got a Real Job, I would pay it off. While I might have been able to pull this off, it would have been harder to do if I had kept piling debt on. And frankly, I know several folks with really good paying jobs that still struggle to pay their bills each month. That is much more the rule than the exception.

I got lucky and got out early, but if you haven’t had a chance to pull that off yet, I would really encourage you to take a step back and run a few numbers to see how much more you are paying for things if you tack on the interest of a credit card on the purchase. For me, it was a tough process at first. It’s not unlike trying to focus your thoughts on an aspect of your personality/relationships/body/life that you don’t like. It’s not fun, but if you can give it a good go and make a change based on it for the better, the reward from both a personal satisfaction as well as a financial perspective are great.

I mentioned the other day that I’ve been listening to Podcasts (link) of Dave Ramsey (link). Wanted to throw out a few more thoughts on him.

1) The approach he uses starts from a Biblical foundation. Most of the time, this barely comes through. On occasion though, it’s very evident. By and large though, the financial advice can be consumed completely independently and he’s really not “preachy”. So, if the Christian tilt bugs it should be pretty easy to just focus on the money handling part of the message.

2) Dave is a salesman. The main product he sells are his “Financial Peace University” program and his “Total Money Makeover” book (which was a N.Y. Times best seller). I become instantly weary when someone tries to sell me something that has to do with money. The number of snake-oil salesmen out there with get rich quick schemes seems legion. And when you expand the thinking to include all the businesses that sell bad debt (credit card companies, crazy jumbo loans, payday advance, title loans, etc…) you really have to be on your guard.

I haven’t read his book yet (I’m waiting for it at the library) or attended his program, but from what I’ve read on his web site and heard in his podcasts, he really is more like a teacher. In that way, the “University” part of his Financial Peace University name is probably pretty accurate. Not unlike college, he really seems to try to teach a skill. In this case, it’s how to handle money and stay out of debt. If you can do that (which he tells you is almost certainly going to be difficult), the cost of his products is way more than worth it.

What it comes down to is that he is making money by doing good works in the world. It’s a little disconcerting to think about him having made millions. The fact that he has done so while signicantly helping others is a wonderful counter balance to all the times you hear about other companies, business, or people screwing folks out of their money.

3) In the podcast, there are commercials where Dave endorses some products. Like most other people the do product commercials, he says that he wouldn’t endorse it if he didn’t believe in it. Based on the rest of his show, I would tend to believe that, but it grates on me every time one of the commercials comes on because it always feels like a higher pressure sales pitch that echos those of the sleazy element out there.

The fact that he’s selling his own product doesn’t bother me, but the fact that he’s hawking other peoples goods really doesn’t sit well. So, I just ignore those parts and focus on the rest of the program.

4) The core of his idea is pretty simple. He calls them the Baby Steps. They are listed here: Baby Steps. If you are looking for a good way to go with your money, I think it’s an excellent path.

I’ve mentioned before that I really started paying attention to my personal finance while I was in college. For several years now, I’ve paid off my credit card every month and the only debt I have is the mortgage on my house. I also put money in my 401K and in a ROTH IRA every year. All that’s to say that I’m doing a lot of things right with my personal finances.

One thing that has helped me to stay on track with all of this is reading personal finance books and blogs. In addition, I have recently started listening to podcasts of the Dave Ramsey Show pod cast (podcast – site).

Initially, I listened to the show a few times just to see what it was like. Most of his focus is on getting people out of debt so I wouldn’t have thought that I would keep tuning in. However, I find that it’s generally really encouraging to listen too. Basically, it helps re-enforce my goal of saving money. I guess this shouldn’t be surprising when you consider how much of the time we are bombarded by both explicit and implicit messages to spend every last dollar we have along with some we don’t via credit cards.

An example of this encouragement is my car. It’s a 1995 Camry that has long sense been paid off. So, no car payments and lower insurance. I’m probably going to get a new one within the next year or so, but for as long as I’ve been at my job (seven years now), I get occasional questions (and shit) from folks about why I don’t get a new one. If someone is just asking, I just say that I like not having car payments. From the look I see on peoples faces after this I’m guessing the pretty much always start thinking about their car payment and how nice it would be to not have to pay that out each month. If someone is being a shit, I tend to drive the point home a little more by asking them what their car payment each month is.

The math of getting and staying out of debt and then building wealth is pretty easy, but the fortitude to do it can take a lot of energy. Especially if you are just getting started. The show and a few blogs I read, like Get Rich Slowly and The Simple Dollar, really help me recharge and stay on track.

E-Trade has recently started offering a great saving account that they call “Complete Savings”. It’s your basic bank savings account except for the fact that they are offering roughly 5% Interest. They have a list of their rates here. All the savings accounts I’ve had before at traditional banks have had less than 1% interest. For example, I have a Wachovia savings account and their interest rate for balance (like mine) less than $10,000 is 0.2%

The E-Trade Complete Savings has no minimum and you can start the account with as little as one dollar. Taking the compounding out of it for now, let’s say you put $1,000 in the E-Trade account and $1,000 in a Wachovia type account. After one year The E-Trade account would have made $50 compared to $2 from the competition.

To use E-Trade of course, you have to be comfortable with Online Banking. Personally, I don’t have a problem with it. In fact, I’ve been using E-Trade since about 2000 (if memory serves). In fact, I use them as my primary bank these days. In regards to the Wachovia account I mentioned earlier, I still keep that one open cause every now and then, I want to be able to walk into a branch. Also, I use Wachovia for my ATM since they are right across the street from me. This way I avoid racking up ATM fees.

A few years ago I checked out from the library one of the Motley Fool’s (http://www.fool.com) books. I think it was The Motley Fool You Have More Than You Think : The Foolish Guide To Personal Finance. I first heard about The Motley Fool back in probably 1998 or 99. At that time, they seemed very much about helping consumers make smart personal finance choices. Now the big thing they seem to do is sell stock newsletters. This is kinda funny because if memory serves that’s one of the things that they say never to do in the book I read. They still have what I think is a lot of good info, but it seems like they want to make a fair chunk of change as well.

Anyway, one of the ideas that I like the best in the book was a technique they put forward for buying a new car. It turns out, they have the basic process on their site now too. It’s pretty long and starts here. They talk a lot about research and prep which makes sense but the thing that was completely new to me is what they get to on step 12. Basically, instead of going into a dealership, you send faxes to a bunch of dealerships asking them to provide a bid for the car you want and provide them with a fax number to reply to. (I think this comes from the book which was done in 2001 or so. E-mail is probably just fine these days, but I’d use a throw away address.)

I love this idea. I don’t plan on buying a new car any time soon, but if you do, it’s worth going over the process the Fool’s outline to see if you want to give it a shot. My guess is that it would work like a charm. Not to mention the basic benefit of having to deal way less with the full court press sales pitch. Probably goes without saying that you will still need to be on your toes for all the other little fees and financing things they will try to get you on.

I really started paying attention to money when I was in college somewhere around the age of 20. Largely after I started listening to the NPR show that was then called Sounds Money (now called Marketplace Money). Incidentally, I think pretty much everyone should listen to that show. You can listen to show online and they also have podcasts.

Generally, the show has a basic theme for the week which isn’t always of interest. However, if the main theme isn’t directly related to me, there are almost always good, down to earth discussions that are very helpful. I can largely credit this show with my first introduction to how money really works. For example, one thing they tend to talk about is how it’s not in your favor to carry credit card debt. My freshman year in college I signed up for a credit card and proceeded to max it out (to I think $500) pretty quickly. Not a big deal as I could easily afford the minimum monthly payments.

Of course, the interest the card was charging (if memory servers around %16) wasn’t working in my favor. I kind of got this intuitively each time I paid the bill but it never really clicked. So, over the next few years I kept adding to my credit card debt. Naturally, the credit card companies helped me out in this by upping my limit each time I moved in around the max.

It wasn’t till I started listening to the show that the actual amount I was actually paying started to click. And more to the point, the fact that I was effectively paying way more for things than the initial purchase price because of the interest really got to me once I understood it. At that point in time, I was still in school and was pretty much self supported. I wasn’t starving by any means, but I certainly wasn’t raking it in.

Based mostly on what I had learned on the show, I started to pay off my credit cards. I would still charge things to them occasionally, but in general I was trying to pay them down. I don’t remember when I finally got them completely paid off, but once I did, I kept them that way. This is not to say that I don’t still use them. I put most of my purchases on my credit card these days. The difference is that now I pay it off in full each month. I don’t even know what the interest rate on my card is right now, because it doesn’t really have any baring on me. I never pay interest because I always pay the card balance off in full when the bill is due.

I’ll be the first to say, that it was not easy to pay off the card. This came from two levels. First, I was in a college job when I first stated so there wasn’t a tremendous amount of income heading my way. The second thing was the fact that as soon as I paid some down on the card I would be sorely tempted to use the newly available credit to get any number of things. This was much harder to deal with. What finally helped get me there though was reminding myself that I wanted any interest to be coming into my pocket instead of going out.

Discounting Bill Gates, Warren Buffett and the other few super-duper-ultra-rich in the world, there will always be more things out there that we want than we will be able to afford. Credit cards (and the like) allow us to get some of these things when we really shouldn’t, but they charge a hefty price for this. Not only do we end up paying the interest to the them that wouldn’t be necessary if we made the purchase in cash (or paid off the card every month), but it also prevents us from saving money for ourselves. This is badness compounded by the fact that we also lose the growth that those savings would have otherwise provided. Your classic Double Whammy.

The wild thing about this is that if you manage to tip the scales in the other way and save money so that interest and other returns are coming in, after a while you’ll have a lot more money to do things with. If you don’t, it’s not hard to end up paying for things forever with much less to show for it.

So, all this is to say, if you have a credit card and you carry debt over month to month and pay interest on it, I’d recommend really taking a look at what you are spending on and see if you can’t start to swing things back in your favor.

I was looking for a NASDAQ index fund and came across this article about QQQDirect. It is a commission free way to do dollar-cost investing in a NASDAQ tracking “spider” stock. If you aren’t already investing in your 401K at work, or ROTH IRA, start that first. But, if you are looking for a long term investing option outside of a retirement account, this is a good one. The fact that there is no commision is great, as all the money you put in will work for you. And the fee for maintaing the stock is incredibly low.

If you put $50/month in this at the average return is 8% (a conservative estimate), you’ll have a little over $73,000 in thirty years.

For all you hackers out there who are into finance, if you want a data feed of stock info, check out Yahoo Finance’s stock quotes. On that page you will find a “download data” link that provides a .csv file with some basic price info. Very handy.

If you browse around their site, there are other places that also have download links. Kudos to Yahoo for providing raw data.