Category Archives: Personal Finance

How I save money by NOT doing Auto-pay [and in some cases from it]

I was looking at my electricity bill the other day and something caught my attention [Yes, I do look at my bills every month and in general if there is something that talks about saving money, it gets my attention] There is a difference of $2.5 depending on the option you choose for billing (see the image below for the available options) – say if the bill is $100, it’s 2.5% cashback, which is more than most of credit cards provide; it’s even more cashback in winter when the electricity bill is lower (assuming the heating uses gas).

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That was an example of how you could save money by autopay, which works well for necessities such as utility bills. I still have reminders in my calendar just to track when the payment is due, but not having to worry about opening the computer -> going to the website ->  looking up for logon info in Keepass -> entering the credit card or bank account number -> paying -> shutting down computer is great! Considering on an average of 5 – 6 bills every month and if each one takes 5 – 10 mins of your time, it’s a waste of almost an hour that you could spend watching “Stranger Things” on Netflix.

According to one statistic about 61% of Americans have at least one bill on autopay, which is great but what about the payments for discretionary items. Should we still set it to pay automatically? That’s the question we’re trying to answer. Tell me if any of the following sound familiar:

  • Only exercise you get from your gym membership is thought of going back someday, when you see the monthly charge on your card
  • You keep getting Rolling Stones in your mail and use it as mouse-pad
  • You hardly order anything from Amazon anymore, but continue to have prime membership thinking you may need something urgently that’s only available on Amazon and free 2-day shipping is the only way to get it

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You think about canceling the service next month, which turns into next month again then you move and the next person who rents the apartment gets to use those magazines as napkin. Where does it end?! Right there when you cancel the auto payment. I recently let go of my Amazon Prime membership and few others that I was still using but didn’t value anymore. It may not sound too much per month, but that’s the trick they play to make it sound less. That $19.99 membership doesn’t sound a lot until you calculate the yearly cost which is $239.88 and now all of a sudden you can afford the JLo concert you always wanted to go to! [not saying you should spend the savings, in fact investing is a better option, but at least now you got more options]

Also when you don’t care about certain specific things anymore but still like to use it sometimes, that $9.99 Spotify subscription for example, you can always look for cheaper alternative. Like most of the thinks in life, automating payments can help or hurt depending on how you use it. My advice: use it wisely!

Bad debt, good debt & cost of borrowing money

Growing up, I never thought of borrowing money as a tool, rather it was a sign of not having enough money to pay for whatever you were trying to buy. It wasn’t until I started working that I learned more about it. Internet has a lot of information about types of debts, so I’ll skip that part. You can read about it on investopedia, bankrate, or cnbc to name a few websites.

What is considered bad debt may not be so depending on how you use it – it can be explained by considering the cost of borrowing money. Interest is what we pay to use other people’s money (OPM); there are several things to consider when borrowing, some of which are following:

  • Total amount borrowed
  • Fees associated with loan process
  • Interest rate
  • Length of borrowing
  • Early repayment terms

Looking at the bigger picture, this can be used to your advantage and possibly also help acquire good debt.

Bad Debt #1: Car Loan

Last year when I was buying a car, I had thought about paying cash since car loan is typically considered a bad debt – it seemed like a good idea until I ran the numbers:

  • I was getting a car loan for upto $25K at 1.99% without any other processing fee or extra charge
  • I was also considering buying a house in near future

I could pay cash for the car and figure out the house down payment later or, which I eventually ended up doing, take a car loan an put more cash towards the house. Our home loan had interest rate of 4% and we didn’t have to pay PMI because of the extra down payment I could afford. Considering that the interest for the car loan is half of that for the house, it turned out to be a good deal.

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Bad Debt #2: Credit Card

I always pay credit card bills on time and never carry any balance. In this one instance, I had to pay the bill on Thu and I was going to get paid, a day later, on Fri. I paid the minimum balance on Thu and waited to get paid to clear rest of the balance; total interest paid <$1. The high interest rate for credit card is the yearly rate and unless you plan to not pay for an entire year, the interest doesn’t accumulate much. Compare that with payday loan or bank overdraft fee, both of which cost more than $30!

Bad Debt #3: Store Credit card:

I am not a fan of store credit card in general, primarily because those can’t be used anywhere else. After buying the house, we still had to buy appliances and furniture. I did research on what I wanted to buy and compared prices at 3-4 physical stores besides checking online. Finally went to the one which had the lowest price for what we wanted (considered brand name, type of appliance, size etc.), they were also willing to price match.

I was going to buy from there for the lowest price alone, but they offered more discount if we used store credit card. The card also came with 0% interest for 18 months, which was an added advantage. That’s the only time I’ve used store card and didn’t think it was a bad debt because of the savings and not having to pay any interest.

When making a decision about using cash vs OPM, consider above factors and remember to do your own calculation not what the seller shows you.

P.S. My friend and I had this joke about me not willing to pay $500 to get my mustang’s broken window repaired. His exact words, “You didn’t want to pay $500 for the window, so you bought a new car for $15,000?!” I had my reasons. 

 

Chase Sapphire card annual fee [prorated] credit

If you have multiple credit cards with annual fee, you should review [at least once a year] whether all of them are still worth the fee; if not, downgrading to a no fee card is a good idea.

I was reviewing my cards few weeks ago and realized that I didn’t Chase Sapphire Preferred anymore. It was September already and they charged the annual fee in Jun, so I wasn’t sure whether I was going to any any prorated refund; but as I like to say, “you never know until you try.” I looked up online to see what other folks have experienced and found these articles from MillionMileSecrets.com and DoctorOfCredit.com. Knowing there was a chance, first I looked up on what card I wanted to downgrade to – I didn’t want to cancel the card and lose the credit limit. I figured I could take change freedom unlimited because it had no annual fee and unlimited 1.5% cashback. I could also transfer these points to other chase card using ultimate rewards. wallet_coins

I called the customer service and explained the situation, they were willing to do a product transfer (I had owned this card for 3 years, so I wasn’t just trying to use the card for points then get rid of it) but said they don’t do annual fee credit so even though I could do a product transfer now, it’s better to wait till next Jun so I can take advantage of the features that comes with Sapphire card. I wasn’t very keen on that but understood the point.

A week later, new statement generated and I paid the bill in full, like I always do. I decided to call again about the fee refund since I didn’t really like the idea of paying for a card I didn’t need. After going through the same story again, this time I was told that I would get prorated refund. Score! A week later (this morning when I checked), I had the credit in my account.

fee_Credit

Since it was a product change, they didn’t do a hard inquiry to my credit. The good thing is, while the other card is in transit, my current card still works!

Next time if you’re talking to a bank agent and are not satisfied with the response, it’s always a good idea to call back again later.

 

If you think money doesn’t buy happiness, you’re not spending it right

There are a lot of skeptics out there – don’t let them tell you what money can or can’t buy! I’ve always been a believer of the fact that money spent right brings happiness, but of course it’s not the panacea for all the problems out there.

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Over the years, I’ve seen several research papers and read books about it and a lot of those resonate with me. One of the first studies I came across had the point of diminishing returns at $75,000 – the 2010 research talks about evaluation of life and emotional well being and how money affects those.

So those of you who’re reading this article and make more than 75K (adjusted for inflation this would be more like 85K in 2017), let us know in comments whether life has gotten happier after the magic income.

Then I saw the fascinating  research of Michael Norton (see his TED talk below) about how can money buy happiness – when you spend it on someone else. The speech highlights specific data points and details of the experiments that were performed.

If you’re convinced and/or inspired by Norton’s speech, consider making donation to redcross for Hurricane Harvey or Hurricane Irma  disaster relief fund (or DonorsChoose.org for that matter)

The Book “Happy Money: The Science of Smarter Spending” has some great findings too about how to spend money to become happier.

  1. Buy Experiences
  2. Make it a Treat
  3. Buy Time
  4. Pay Now, Consume Later
  5. Invest in Others

Taking examples from my life, I’d be lying if I said I donate money for selfless reasons [it does feel good to help others, thus helping oneself). I’ve also written about enjoying experiences in life more than buying things. Even simpler pleasures in life such as using dishwasher that frees up time adds to the happiness (#3 from the list above).

What are some of the ways you’ve spent money that made you feel happier?

How to create a professional website in less than an hour & < $100

Thanks to all the information available online, you can do a lot of things yourself and creating a website shouldn’t be an exception. I created my first website back in 2006 and since then have owned several domain names and blogs.

website

Here’s a quick tutorial on how to create a website yourself; on a broad level a website consists of 3 building blocks:

  1. Domain Name: the name you type in browser; for example google.com or stretching.cash (for my website)
  2. Hosting: This is where the website resides; think of this as a house where you can put your content, web pages, pictures etc. If you guessed that it’s on the cloud, you’re right!
  3. Template (or theme): This has to do with the look and feel of the website (also the functionality and customization)

Let’s talk about details of each block:

  • Domain Name: this can be same as your business name or anything else you choose. You can either pick one of the traditional ones such as .com, .net, .info etc. or new ones such as .photography, .website, .blog, .wedding, .cash, etc. (these are just examples and there are lot more names available)
    • Domains can cost anywhere between $15 – $30 deepening on the name
    • you can use sites such as godaddy.com or 1and1.com to buy domains
    • I like 1and1 because you can get a domain for as less as $1 for the first year and all the domains come with private registration included in the fee (example below)

1and1_example

  • Choose a template:  After you have wordpress installed at your choice of hosting provider, you can use one of several free themes

Ta-da! the website is ready. You can customize and also accept payments on your website. Another option that combines all the steps (if you don’t want to be bother with so many steps) is to register at wordpress.com and buy one of their plans (see current pricing below)

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