My gift card audit: I had almost $80 lying around
Short on cash? After you’re done digging around in couch cushions and winter coat pockets, look to the gift cards hiding in the back of your wallet. You may have more money on those cards than you think.
Realizing my wallet was thick with not-quite-used-up gift cards, I decided to do an audit. So I sat down at the computer and looked up how much I had on each card. Across the eight gift cards I’d received in the past year or so, I had a total of $79.
Here’s the buried treasure I found:
- $15 on a local movie theater gift card
- $20 on a gift card to an Italian restaurant chain
- $10 on a Target gift card
- Between $3 and $12 each on a smattering of American Express and Vanilla Visa gift cards
My situation illustrates precisely why retailers, issuers and restaurants love these things. Thoughtful people buy gift cards as holiday gifts for the impossible-to-buy-for people on their gift lists. The recipients use some of the funds on the gift cards and forget about the rest. About $2 billion worth of gift card funds (about 2 percent of the money loaded onto them) went unused in 2011, according to research firm TowerGroup. That was actually down from the amount wasted in 2007, when $3.5 billion went unused. The Great Recession, it would seem, made consumers more likely to squeeze every last dollar out of their gift cards.
My gift card waste (the industry calls it “breakage”) was at about 17 percent of the original amount loaded across all my cards. How did that happen? In some cases (as with the movie theater card and the restaurant card), I used both cards once, intending to use of the rest later, but never did. As for the rest, it was a combination of tip tolerance (a frustrating practice that causes some of the funds to be “frozen” when you use the card at a restaurant and later refunded) and my own forgetfulness.
Since discovering this modest windfall, I’ve tried to use it wisely — and not as an excuse for extra spending. I took my boyfriend to see a movie we’d been eagerly awaiting for months and had already worked into our “fun” budget (it was a matinee, so the gift card covered both tickets). We will also be using the restaurant gift card for our scheduled weekly meal out this week. As for the remaining cards, I used them all for a purchase I’d been delaying for a couple months: a vacuum cleaner to replace my broken one. The cashier looked a little impatient, but I ran all six cards through, reducing a $70 purchase to just under $30.
If you suspect you have some funds languishing on gift cards, keep these things in mind:
- Your funds are safer than they used to be. The CARD Act of 2009 limits inactivity fees that can be charged on gift card funds (such fees can kick in only after the card has gone unused for 12 months) and prevents funds from expiring within five years of activation.
- You can sell the cards for cash. Personal finance blog Common Sense Millennial has some instructions for leveraging unwanted gift cards into cash or even discounted gift cards at the stores and websites you actually shop at. There are several gift card swap sites that let you do this.
Forgetting about my gift cards gave me a nice surprise at a time of year when money gets tight. Still, I’m planning to do a better job of keeping track in the future so that I can strategically let funds pile up and for larger purchases — and the occasional splurge.
Credit card deposit can lead to post-vacation stress
My husband and I (and our dogs) recently spent a weekend at a cabin in the mountains of north Georgia for some much-needed relaxation. The trip was wonderful, but one thing stressed me out: the vacation rental deposit.
The cabin itself was more like a rustic house, with two floors, a full kitchen and a huge sun porch with a hot tub. The deposit was big, too: $350.
When we checked in, the owner asked how we wanted to pay our deposit, and we handed over our credit card.
After our trip, I kept checking our credit card account online, expecting to see a credit. Days passed, then a week, and I started to get worried. I wondered if our dogs had caused some damage to the house that I hadn’t noticed. I checked the vacation rental website for information about deposits, and I saw a notice that said the money is refunded by paper check within 14 days after checkout.
I went ahead and paid the credit card bill in full. When no check arrived, I looked at our credit card account again and found a credit for the deposit amount, which caused a negative balance. I wished I had asked more questions ahead of time to save myself some hassle.
Like ours, most vacation rental deposits aren’t cheap. According to vacation rental site FlipKey.com, the typical deposit runs from $200 to $500 or more. So it pays to be vigilant when handing over that much money. To avoid problems (and stress) associated with vacation rental deposits, follow these tips:
1. Ask a lot of questions. Here are some things you should know before handing over your card:
- How much is the deposit?
- Is any part of the deposit non-refundable? For example, according to FlipKey.com, some deposits include cleaning or pet fees.
- Under what circumstances would you keep all or part of it?
- When and how will it be returned?
2. Learn the laws. According to FlipKey.com, consumers are protected by local laws that should spell out how much time the owner has to return the security deposit (usually 14 to 30 days) and under what circumstances the owner can keep the deposit. In some places, according to vacation rental company HomeAway, the owner has to provide receipts for repairs when keeping part or all of the deposit.
3. Get it in writing. Don’t rely on verbal assurances that you’ll get your deposit back. Make sure you get — and hang on to — a piece of paper that spells out the specifics of the deposit. In our case, we did get a detailed document that told how much would be charged for certain transgressions.
4. Use your credit card to pay it. The best way to pay for a vacation rental, including the deposit, is to use a credit card, according to travel site Frommers.com. Credit cards offer more consumer protections than other methods of payment, including the ability to dispute a charge — if, for example, the owner keeps the security deposit for damage you didn’t cause.
5. Check for damage when you arrive. FlipKey.com recommends doing a walk-through of the property as soon as you get in and notifying the manager or owner right away if you find damage. When we read online reviews for the cabin we rented, a previous guest had complained that the owner kept their security deposit over a couch pillow that had been chewed by a dog. The guest denied it was their dog that had an appetite for upholstery. If that was true, the dispute could have been avoided with a walk-through.
6. Be a good guest. According to RentByOwnerGuide.com, one reason owners charge security deposits is to give renters more incentive to be careful and neat during their stay. When we were at the cabin, we read the rules thoroughly and tried to treat the home as if it belonged to a friend. We even cleaned before we left. One exception: We did let our dog get on the bed, despite a warning that a fee would be charged if “excessive pet hair” was found on the comforter.
Next time, I’ll definitely follow these rules to avoid post-vacation fretting about whether or not I’ll get my deposit back. After all, a vacation is supposed to alleviate, not cause, stress.
I’ve been converted: Why I’m now an early holiday shopper
I have a friend (and don’t we all?) who always finishes her holiday shopping before the end of November. I often mocked her — and yet I wanted to be her. Sure, I’d make fun of her “Done with shopping! Good luck out there, procrastinators!” Facebook update on Thanksgiving weekend while I ate pie. But I always ended up eating my words while I was ordering gifts at the last minute and hoping they’d ship on time and trying to find parking at the mall on Dec. 24.
So this year, I decided to be my friend (instead of mock her) — and start my holiday shopping in September. It’s early November, and all my gifts are firmly decided — or already ordered. Turns out, this has saved me money, in addition to stress.
Here’s why I’m now an early-shopping convert:
Stress leads to expensive choices: When you head out at the last minute to complete your shopping, you get in the mindset of needing something, anything to put under the tree. That anxiety can lead to you putting something, anything in your cart, even if it’s more than you’d rather spend. In September, I made a list of all the people I’m buying gifts for. Over the next month or so, I jotted down ideas for gifts whenever they occurred to me. I then whittled down the list to the best ideas that were well within my budget.
That list became my game plan, and it’s a bit like having a shopping list when you hit the grocery store — which has long been a money-saving staple in the personal finance realm. As the blog Cash Cow Couple points out, having a list can prevent impulse buys and limit the amount of time you spend in the store, becoming ever more vulnerable to the sneaky signage that retailers use to get you to spend more.
There’s time to be creative and thrifty: When it’s days before the holiday party, you don’t have time to make a gift or even order one online. You’re limited to store-bought, ready-to-go stuff. This year, I’ve had plenty of time to put together a music compilation of local bands for a music fan on my list — and make a photo collage by hand.
You can make your purchases work for you: I’m getting close to my three-month deadline to spend $xxx to qualify for my new airline credit card’s sign-up bonus. The deadline is in mid-November, so the week before Dec. 25 would be too late. By moving up my shopping, I was able to use a couple larger purchases to make my sign-up bonus instead of scrambling to reach it by making unnecessary purchases.
There’s plenty of room to compare and crowd-source: By starting early, I’ve had plenty of time to comparison shop and make sure I got the best deal. Before buying someone a gift card to a day spa, I was able to read lots of online reviews and ask friends which local spas they recommended. I was also able to get multiple quotes for a custom-made gift and pick the most affordable one (which required three weeks for completion) — and not limit my options to the business that could get the job done the fastest.
So why do so many shoppers (including me for so many years) wait?
According to an October 2013 survey from consulting firm Accenture, 33 percent of shoppers do the bulk of their shopping in December (and 13 percent of those late shoppers start after Dec. 15). Being too busy to shop earlier was the most common reason late shoppers gave for their habits, followed by needing more time to save up for gifts. This December 2012 article from The Fiscal Times provides another reason: “Buy presents” is a vague goal, the type that tends to get put off. By making the goal specific (for example, “Buy Mom lilac-scented candles”), you’re more likely to accomplish it quickly. Perhaps that’s why the first step I took in my early-shopping goal (making a list) has helped me see it through.
It’s still early November, so it’s not too late to get an early start on holiday shopping. Let these tips and from personal finance bloggers help you:
Wise Bread’s Kentin Waits argues that there are still plenty of good deals to be had long before Black Friday.
Jackie at Fabulous & Frugal suggests creating a “holiday shopping” fund far in advance and then picking up items on sale throughout the year.
Frugal Rules proposes hitting garage sales and thrift stores for certain items on your list — including children’s toys. Kids won’t know the difference between brand new and used.
The Greenest Dollar points out that, if you take enough time to plan your gifts, you can not only save money, but help save the environment as well.
One Cent at a Time has a list of 101 inexpensive gifts that virtually anyone will like.
Financial Highway has some tips for using your cash-back credit cards to your advantage during holiday shopping.
When it comes to personal finances, millennials follow their friends
My parents said it, and perhaps yours did as well: “If all your friends jumped off a cliff, would you do it, too?” It was a rage-inducing line that generally corresponded with me not getting what I wanted. Yet the underlying advice is pretty solid: “Think before you follow.”
Those who don’t learn that lesson grow up to embody another clichéd saying: “Keeping up with the Joneses.” And millennials (young adults just out of college to those in their early-30s) are particularly influenced by what others buy. According to an October 2013 survey from the American Institute, 78 percent of millennials tend to model their financial decisions after their friends. Meanwhile, 66 percent try to keep up with their peers based on the neighborhoods they live in, and 64 percent base their clothing purchase on their peers’ choices. Almost two out of three millennials say they experience pressure to eat at certain places or own certain gadgets because their friends do.
Because I’m on the tail end of the millennial generation, this got me thinking about how much peers’ financial habits affect my own. I’m sure I do spend more than I would have if I lived in a Facebook-less vacuum. Seeing a cute pair of shoes in a friend’s Facebook picture has influenced me to pick a more expensive (and stylish) pair for myself when shoe-shopping. Plus, I already have a travel addiction, and being exposed to around-the-clock vacation pictures, I’m sure, fuels that habit.
The notion that constant exposure to your friends’ lives via social media causes you to spend more isn’t new. A September 2012 study from a pair of marketing professors from Columbia University and the University of Pittsburgh found a positive correlation between credit card debt and frequent social media use.
At the same time, it’s not as if I haven’t gleaned some positive money-management habits from my friends. For every vacation status update, I’ll see a “Paid off my student loans” or “Just made my last car payment” update. I talked with a friend about our respective emergency savings funds just last week (exciting, I know) and chatted with a friend about his super-frugal wedding and “saving up for a baby account” over lunch this week. Another friend explained to me how he and his wife hadn’t eaten at a restaurant in more than six months — they flip open a cookbook with their eyes closed every night and cook whatever recipe they land on. Whenever I have these conversations, I feel inspired — and that inspiration outlasts the temptation I feel when I see a nice article of clothing or a “Sitting on a beach with a cocktail” Instagram photo.
I’m sure it helps that I’m friends with people who don’t place a high value on status symbols. Those with high-spending acquaintances probably pay more to keep up with their peers. How do your friends’ money habits influence your own? Do they inspire you to save — or urge you to spend? If you’re part of the latter group, here’s some advice from the personal finance blogosphere:
The Simple Dollar points out that, thanks to how trendy thrifty living has become, keeping up with the frugal “Smiths” could replace keeping up with the extravagant “Joneses.”
Making Sense of Cents confesses a few times the “jealous monster” takes over and encourages overspending.
My Simpler Life has 20 ways to reroute the urge to spend. One of them? Surrounding yourself with frugal people.
Modest Money contemplates how the digital age pressures us to spend more by giving us a 24/7 news feed of others’ wealth and lifestyles.
Well Heeled Blog argues that travel has become the newest status symbol.
Money Ning provides advice for changing the dynamic of friendships that are costing you too much money.
Donate a dollar in the checkout line? Why I say “no”
You’re in line at the grocery store, you swipe your card to pay, and the cashier — or PIN pad — asks if you’d like to donate a dollar or more to charity. What do you do?
If you’re paying with plastic, it can be especially tempting to say yes without thinking, because it makes you look like a good person and you don’t have to dig a $1 or $5 bill out of your wallet.
But I always resist the pressure, and here are six reasons why:
- I feel put on the spot when I get hit up for a donation, with everyone in line watching, as I’m buying bread or dog food. I’m not the only one: Wall Street Journal columnist Eric Felten writes that checkout charity requests leave him feeling less than warm and fuzzy — and happiness is one of the perks of charitable giving, after all.
- I like to take time to research the charities I support, rather than just going with the one Publix picked that month. As personal finance site Kiplinger points out, it’s not exactly easy to check out a charity’s finances “while juggling the milk and bananas.”
- I don’t like to funnel my donations through a third party. I always wonder if the store takes a cut or reaps a big write-off at tax time. Charity Navigator’s guide, “The Top 10 Best Practices of Savvy Donors,” recommends eliminating the middleman and giving directly to the organization of your choice.
- I prefer to donate to smaller, local charities rather than the national heavy hitters so well represented on the checkout charity circuit. As Trent Hamm, personal finance blogger from The Simple Dollar argues, supporting local organizations has several benefits: You get to help a smaller group with fewer resources and you can directly witness the impact of your gift. That’s why I’d always rather give funds to a local animal rescue group that needs money to save a local death-row dog than, say, The Humane Society of the United States.
- I think requests for donations in the checkout lane encourage mindless spending. Does it really matter if it’s a donation to a charity or an impulse purchase? The end result is the same: You’re parted from your money without planning ahead of time. And it’s not as if donation requests only happen once in a while. I’ve been asked for contributions at least three times in the past few weeks. And as Hamm of The Simple Dollar points out, it can be harder to track your donations if you make lots of small contributions.
- Finally, I gravitate toward helping causes in more personal ways. For example, I’ve found fostering homeless animals to be the most rewarding way I’ve ever supported a cause I care about. So, maybe you hold on to your dollar at the checkout, but you give an afternoon helping at a soup kitchen or building houses for families who need shelter.
On the other hand, I can see some advantages of donating in the checkout line. For one, I’m sure these campaigns are an excellent way to raise money for worthy charities from consumers who otherwise might not have donated. Giving this way is super easy — you don’t have to look up a charity, figure out how to give and even possibly write a check and address an envelope. And it’s pretty painless, too, since you’re usually asked to kick in just a small amount.
I can see why those who donate do, but I doubt I’ll ever start doing the same.
Stores are tracking your every move via your cellphone
As Black Friday of 2011 approached, two shopping malls (one in California and one in Virginia) announced plans to track holiday shoppers via their cellphone signals as they moved from store to store. The backlash from consumers was swift, and both malls canceled their plans. Score one for privacy, right?
Actually, probably not.
Since then, other businesses have quietly begun tracking their customers to keep tabs on the paths they take through their store, how much time they spend in the aisles and which displays cause them to linger. Any customer carrying a smartphone and using the store’s Wi-Fi can be tracked, regardless of whether they’re using the store’s shopping app.
If you’re already a fan of mobile payment applications and digital loyalty programs (which know when you’re inside a store and give you discounts based on your shopping habits), that news is probably worth no more than a shrug and a sigh of “big deal.” The information collected is generally anonymous, after all.
But if you’re creeped out and reaching for your tinfoil hat, here’s what you need to know about these stores’ surveillance programs — and how you can opt out of them.
How it works
The surveillance, which is completely legal, begins when you connect to the store’s Wi-Fi network. The surveillance system then stores your phone’s media access control (MAC) address, a unique identifier for your device. At that point, the store can track your phone (i.e., you) around the store. If you come back, the system recognizes your MAC address and therefore knows you’re a repeat customer.
Stores generally rely on third-party companies to set up their surveillance systems and collect the data. These companies also often provide video surveillance systems that follow customers’ paths via camera (which gives the store information such as gender and estimated age). You can get a better idea of how all this works by watching this video from the New York Times.
Who’s doing it?
A slew of retailers, including Home Depot and Family Dollar, are using cellphone-tracking (aka mobile location analysis) technology. According to the New York Times, smaller merchants (and even coffee shops) are as well. Copenhagen International Airport has been doing it for years. Nordstrom gave it a shot, but when it posted signs warning customers about its program, shoppers pushed back, and the store axed its tracking system.
A push for privacy
In October 2013, U.S. Senator Charles Schumer, along with several of the third-party tracking companies, created a “code of conduct” for mobile location analysis technology. The code applies only to companies that collect personally identifying information about shoppers — in other words, information that allows the store to know who you are and enables it to get in touch with you. Stores that are simply using phones’ Wi-Fi signals to track customers anonymously and immediately stripping identifying information from the data that is being stored are exempt.
According to the code, third-party companies that collect identifying data must:
- Give a chance to opt out: Companies collecting data on behalf of stores must give customers a way to opt out. The centralized opt-out system isn’t live yet, but should be in a few months. Opting out will most likely involve calling a number or visiting a website, providing your phone’s MAC address and saying you don’t want it tracked. It will likely function similar to registering with the National Do Not Call Registry.
Again, the above code of conduct applies only to the collection of identifying information. If you’re uncomfortable with stores collecting anonymous information (or any kind of tracking in general), it will do little to protect you. Plus, the code does not stipulate any punishments for companies that fail to comply. Although several of them have opted in to the code of conduct, nothing is forcing other companies to do so.
What if I find this all super creepy?
If merchants collecting data on you makes your skin crawl, the tide is turning rapidly against you. In fact, online merchants have been collecting information on you for years, from what you buy to which sites you visit next. Yet those concerned about their privacy always had the option of visiting a store and paying in cash. These in-store tracking programs erode that privilege quite a bit for anyone carrying a Wi-Fi-enabled phone (and who doesn’t, these days?)
Still, you have options. Even before Sen. Schumer’s code of contact, third-party mobile location analysis companies have given customers the opportunity to opt out of monitoring. For example, Euclid (the company Nordstrom used) and Mexia Interactive (another monitoring company) both have Web pages that let consumers opt out by providing their MAC addresses. Both sites also contain detailed instructions for locating your MAC address. Of course, until the centralized opt-out site described in the code of conduct is up and running, you’d have to engage in game of opt-out Whac-A-Mole and tell all these companies (and there are many) that your MAC address is off-limits.
In the meantime, if you’re looking for a sure-fire way to shop anonymously, there’s an even simpler solution — disable your phone’s Wi-Fi when you hit the stores.
2 credit card marketing tactics that make me squeamish
Because I work for a card comparison site, friends and family often assume I’m a credit card proponent. But that’s not always accurate. Because I learn about debt and its consequences all day every day, I accept that certain people should steer clear of plastic. Plus, editing stories about deciphering sales pitches, researching rewards programs and reading the fine print has taught me that applying for a card is a major financial decision that should only be made after much debate.
In fact, knowing as much as I do about credit makes me even more squeamish when I see over-the-top credit card marketing tactics. Here are two I’ve been subjected to recently — and why I find them so troubling.
The “captive audience” method: On a recent flight, I was awakened from a nap by the words “Earn 500 bonus miles!” Was it one of those credit-related dreams I often have? No. It was the flight attendant hawking the airline’s rewards card. The five-minute-long sales pitch emphasized the card’s benefits (free drinks, free checked bags) and dangled the extra reward of 500 bonus miles for those who signed up during the flight (on top of the 40,000-mile sign-up bonus that’s available to everyone). The attendant then walked up the aisle with applications, stopping every few rows to ask who was interested. As we prepared for landing, she added another quick plug for the card just after asking us to make sure our seatbacks were in the upright position. This happened on all four legs of my round trip, meaning that I (and everyone else on similar itineraries) was bombarded with the credit pitch eight times in one weekend.
Why it bothers me:
- The audience of this pitch was about as captive as it gets — 30,000 feet in the air and strapped in. There was no opportunity to compare this airline’s sign-up bonus (which I will admit was pretty good) with that of other cards or to read online reviews. Plus, I just don’t think it’s fair to invite people to make a major financial decision when they’ve essentially endured sleep deprivation torture for the past three hours, thanks to the screaming babies and a lack of legroom.
- The pitch had a time constraint. The 500 bonus miles were promised only to those who filled out an application before exiting the plane. These “for a limited time” sales tactics can lead to hasty decisions. Plus, 500 miles is pretty worthless, considering you need about 24,000 miles to make a round trip.
The “spend more to earn more” method: The online streaming service I use to watch TV and movies has been constantly playing commercials for a card that offers extra points in certain categories. The scenarios differ, but the commercials involve someone spending extra — fighting a friend for the lunch check, taking a date to the most expensive restaurants in town or buying concert tickets for their daughter and her friends. When an incredulous observer asks how they can afford to be so generous, the hero, with a knowing smile, mentions that their credit card is allowing them to earn double points for those purchases.
Why it bothers me:
- Rewards cards should be used for earning a little extra on planned purchases. Encouraging cardholders to go out of their way to earn points can lead to overspending — and interest charges that will likely cancel out those rewards if the balance isn’t paid in full when the bill arrives.
- “Double points” aren’t really worth that much. It depends on how you redeem your rewards, but, in general, a point is worth about a cent. So those double points are worth about 2 cents per dollar. This can really work for you when you’re buying something planned and expensive — such as a large appliance you’ve saved up for. But throwing down your card for extra meals and tickets? You’re earning a couple cents while adding to your balance.
Although sales pitches for credit cards can be problematic, the cards behind them can be both useful credit-building tools and a way to earn rewards on what you’d normally spend money on. If your interest is piqued by a tempting sales pitch, ask yourself these questions before signing up:
- Is this actually good for my credit? If you are already struggling with debt, don’t sign up. If you’re planning on applying for a major loan, don’t sign up — the hard pull on your credit report will ding your score. Credit considerations should come before rewards considerations. In fact, fixing your credit first will actually help you qualify for better cards with lucrative rewards, as Brian Kelly, founder of ThePointsGuy.com points out in a Q&A on travel blog Nomadic Matt.
- Is this card actually good for me? Consider how much you actually fly the airline offering the card — or how much you actually spend in bonus categories. Also consider whether you’ll carry a balance. If so, you’re better off going for a low-interest card than a high-rewards one.
- What is this card trying to sell? And what’s it trying to hide? As personal finance blog The Simple Dollar points out, mailed credit card offers will often draw your eye to what the card issuer wants to you focus on — a giant “0%,” for example, if it’s a balance transfer card. What you need to search for is the larger number (in smaller print) — the interest rate the card will revert to once the intro period ends.
- What else is out there? If an airline card advertisement boasts a huge sign-up bonus, check out what other airline cards offer. If an advertisement emphasizes the card’s low interest rate, try to find a card with a lower one. In a guest post for Man Vs. Debt, blogger and author Adam Hagerman, explains how he paid an extra $750 by failing to check other stores when shopping for suits. The same principle applies to card benefits.
Intriguing sales pitches are useful in that they notify you about benefits you might want. The key is using those sales pitches as a challenge to find something better — not as an excuse to sign up on the spot.
How complex is your financial life?
I spent a lot of time debating getting a second credit card. It wasn’t because the credit line would tempt me. It was because I didn’t want another bill to worry about, another account to manage, another statement to check. In other words, I didn’t want to make my financial life more complex.
Still, you can only do so much to keep your finances simple. Having children, buying a home and owning a car all entail more financial obligations. In fact, at CreditCardGuide, our advice even seems to encourage a fair bit of financial complexity. We recommend having multiple bank accounts, including an emergency account, “fun” money accounts and even accounts designated for special events and goals. We also emphasize the importance of having a variety of credit cards to boost your credit score. And, if you want to put your money to work, don’t forget about rewards programs (the average American adult belongs than more than 20).
So, unless you’re an extreme downsizer, life today requires accumulating a daunting number of financial responsibilities.
Here’s how I keep all my financial obligations straight:
- I keep most of my bills off autopay: I’ve blogged in the past about how I’m wary of having too many bills on autopay. Right now, only the easy-to- forget, non-monthly bills (such as my car insurance, which I pay twice yearly) are set up to be paid automatically. At first, this may seem like I’m making my financial life even more complicated. Yet I’ve found that forcing myself to regularly look at certain bills and account balances gives me peace of mind. My finances always feel more complex when I don’t know exactly how much I owe on my credit card and how much my electric bill cost last month. Because I’m paying bills manually, that information is always fresh in my mind. I’ve looked it in the eye, and it seems more under control.
- I use apps for assistance: Mint’s app lets me call up a screen with all my accounts. I can scroll through and check balances without having to log into each one individually. Seeing all my accounts together makes having several accounts manageable — and it prevents me from forgetting the accounts I rarely use. Several months ago, I withdrew some money from my emergency savings to pay for car repairs. Because I scroll through my accounts almost day, the much-lower balance in the emergency account practically shouted, “Feed me!” on a daily basis until I was able to transfer more money in.
- I set up my phone to nag me: Before I got a smartphone, I marked up a paper calendar with all my financial obligations. Now, I let my phone remind me. I get a noisy, blinking reminder for rent and a reminder for each credit card bill, of course. But what this system is really great for is reminding me to check accounts that are so easy to forget — my 401(k) and my Roth IRA. Every month, my phone tells me to log in to those accounts — just to check on things and make sure I know my password. Twice a year, I get reminders to reconsider my 401(k) contribution amount and send a little money into my Roth. This prevents me from panicking upon realizing I haven’t checked my account in more than a year and scrambling to recover my password.
Taken as a whole, this system has me “visiting” all my accounts and bills regularly. That way, I never get the nagging stress of trying to remember to do something — or the sudden jolt of anxiety that comes with forgetting to do something. And my obligations, although numerous, never seem out of control.
Looking to simplify or take control of your complicated finances? The personal finance blogosphere is full of tips:
- Well Heeled Blog recommends paying down credit card balances and prepaying rent to simplify your finances.
- My 2 Cent Opinion argues that paring down the number of financial goals you have will make you more likely to tackle them.
- Man Vs. Debt suggests some radical changes for financial simplification geared at the downsizing crowd.
- Simple Financial Lifestyle lists some common financial stresses (“ugly ducklings”) — and explains how to streamline them into positive habits (“financial swans”).
- Reach Financial Independence has a game plan for tackling all those financial worries floating around in your brain.
Could you go a year without spending? These roommates are trying
“Spending fasts” and no-spend challenges are a staple of the personal finance advice world. The idea is to cut down on discretionary spending for a certain amount of time (often as little as a day) except for necessary bills. When done regularly, no-spend challenges can give your wallet a break, help you bulk up your savings and help you build up the willpower to say “no” to small incidental purchases.
Yet it can be difficult to keep up your no-spend endurance for more than a couple days at a time — which makes what these two Canadian roommates are doing all the more impressive. Julie Phillips and Geoffrey Szuszkiewicz, both of Calgary, have embarked on a veritable no-spending marathon that requires them to give up spending over the course of a year.
They’ll be easing into their zero-spend goal gradually, however. They started the project about two months ago and have divided their journey into three phases:
Phase 1 (Aug. 3, 2013 to Nov. 3, 2013): No consumer goods (for example, clothing and home furnishings).
Phase 2 (Nov. 3, 2013 to July 3, 2014): No services (such as meals out, gas and transit passes).
Phase 3 (July 3, 2014 to August 3, 2014): No food. For the final month of their experiment, Phillips and Szuszkiewicz will not be purchasing any food. They will eat what they can recover from supermarket dumpsters, what friends offer to cook for them and what they can grow themselves.
“Well good for them,” you might think. “But I’m not dumpster diving.”
Even if you’re not willing to go as far as these two, their project’s website is rich in tips you can use in your own (much less exteme) spending fasts. In fact, the entire framework of the plan is based on established behavioral modification techniques that can help you embark on the occasional spending fast or even talk yourself out of the occasional impulse buy. Here are a few you might want to borrow:
- Ease in: Remember those phases from above? If you’re looking to trim your budget, don’t hack off all discretionary spending in one chunk. Instead, borrow Phillips’s and Szuszkiewicz’s phase method. Perhaps you can’t stop yourself from buying new clothing and eating at restaurants at the same time. Consider restricting clothing purchases one month, and then concentrate on cooking and planning meals the next. By dividing a large goal into small but clearly defined steps, you’ll gradually build up the strength and endurance necessary to accomplish it.
- Reinforce good behavior: Rewards enforce behaviors. For example, when you go out to eat with friends, Phillips and Szuszkiewicz point out, you’re rewarded with convenience (you don’t have to cook) and good company, making you more likely to repeat the behavior. So, as the roommates explain, you need to make not spending rewarding, too. List the rewards you’re getting from not spending. Cooking at home, for example, makes you a better chef and helps you eat healthier. Walking to work instead of using gas helps you stay fit and soak up some sun.
- Get social support: Phillips and Szuszkiewicz are blogging about their endeavor, and the media attention their story is getting has given them a sizeable audience that’s rooting for them. That means lots of support — and lots of accountability. So consider telling others about your no-spending goals, asking a friend to keep you company at home on a no-spending day or encouraging your family to cook meals with you. Loneliness can increase the desire to shop — and a lack of accountability can increase the chance that you’ll break down and do it.
- Accept and commit: Phillips and Szuszkiewicz say they’re using a psychological intervention technique called “acceptance and commitment based therapy” (ACT) on their journey. The center of ACT is mindfulness — accepting negative thoughts (which will undoubtedly occur when you can’t buy food) and then recommitting to a lifestyle that reflects your values. The acceptance factor goes even further, the roommates explain. In addition to accepting the emotional lows, they will accept whatever help is offered to them by others.
Similar mindfulness techniques have been getting buzz for a while now in both the frugality and addiction realms. Acknowledging temptation and pausing to reflect on it can help you refocus your energy on your goal — not the mindless purchase you’re about to put in your shopping cart.
Have you ever undertaken a no-spend challenge? What’s the longest you’ve gone without spending? If you’re about to try a spending fast for the first time, prepare for your journey with these tips from personal finance bloggers.
Krystal Yee of Give me Back My Five Bucks describes her plan for 10 days of no spending — and the amount of planning necessary to pull it off.
Well Heeled Blog has a list of the pros and cons of no-spend challenges.
I Will Teach You to be Rich recommends setting aside one day a week as a no-spend day.
When Life Gives You Lemons Add Vodka points out that no-spending days help only certain types of people — and don’t do much for others.
Lindy of Minting Nickels describes how she made a six-month spending fast realistic and sustainable.
I regret saying “yes” to that store credit card sales pitch
I know store credit cards don’t always offer the best deal for consumers. And I’m usually quick to say no to these cards, even if the clerk offers a special deal.
But recently I was in Dillard’s shopping for a dress to wear to a wedding. It was late, I was tired and it was pouring rain outside. The store was about to close, and a nice clerk offered to wait for me to grab a pair of earrings to go with my dress.
When I went to check out, 10 minutes after closing, the saleswoman offered an additional 15 percent off my purchase if I opened a store card. And she told me the discount would be good through the end of the weekend. I knew my husband needed some new clothes for work, so I thought that with the discount and the huge sale that was going on, we could really save some money.
The total looked good — my dress actually rang up as a sale item — and I was so tired I forgot to check my receipt for the additional 15 percent discount. When I went back with my husband a few days later, a different clerk told me there was no discount for opening a card and that the clerk from the previous night had given me wrong information. I went to customer service, explained the situation and was told once again there was no discount for opening the card. I really felt duped.
It’s probably rare to be given completely incorrect information about a store card. Yet I’m definitely not the first person to get pressured into opening one despite knowing better. Blogger April Dykman of Get Rich Slowly, got “suckered” into opening a Neiman Marcus card even though she had previously written about a survey showing the annual percentage rate (APR) on store cards is usually about double the average of that on regular cards. In her case, the store had some merchandise she really wanted, she was running late for an appointment, and the clerk told her the store accepted only its own card, American Express, cash or check (the store has started accepting other bank cards since Dykman’s blog appeared in 2011).
Even if there is a discount for opening a card, which is fairly common, many experts advise against getting a retail card just for the savings. For example, blogger Trent Hamm of The Simple Dollar says the discount just isn’t worth it and can even encourage you to spend more. I know it did with my husband and I: Thinking we were getting an additional price break beyond the sale, we grabbed an extra shirt or two.
So, what should you do if you decide to open a retail credit card just to snag a discount?
1. First of all, Hamm recommends paying off your entire balance immediately. Otherwise, you’ll pay the exorbitant interest rate and your balance could quickly spiral out of control. With my Dillard’s card, I signed up for an online account and paid my card off right away.
2. Then, destroy the physical card, Hamm recommends. You can cut it up or use his preferred method — throwing it into a campfire. This will stop you from using the card again and will prevent the card itself from getting stolen. (I cut mine up.)
3. Decide whether to close the account. There are pros and cons to both courses of action. Closing the card can simplify your finances. However, keeping the card open increases your amount of available credit, which can improve your credit score if you also keep your balance low. Hamm recommends keeping the account open to avoid any credit fluctuations if you plan to apply for a mortgage, a car loan or anything else that requires good credit. (I decided to keep mine open — for now.) If you’re not going to go loan shopping anytime soon and have excellent credit, go ahead and close the card. Any score damage will rectify itself within a short period of time.
4. Wait to apply for a loan. If you’re planning to apply for a loan, you might want to wait several weeks or months, especially if you applied for multiple cards in a short time. That’s because when you applied for the store card, your credit report was pulled — and that pull could lower your score by a few points. But if you have very good credit, and the store card is the only credit you’ve applied for recently, the damage is probably minimal. Pull your credit scores before applying for a major loan to see where you stand.