Living Below Your Means

One thing I learned during a college financial seminar was to always live below my means.  So even though I can afford a Grade A product, I should always go one level below to a Grade B.  It's obviously much harder said than done, and personally speaking, this is one of the most difficult things for me to do.

I've realized in the last few days that living by this rule will make budgeting a lot easier.  Once you start living below your means, you will naturally save more. Usually once people get promoted, they upgrade a lot of things in their lives.  They will get a nicer car or a nicer home or nicer clothes and bags. And while upgrading isn't a horrible thing, sometimes (usually) we start spending right up to our means, which makes budgeting harder.  Mo' money, mo' problems.

This post is really a reminder to myself.  It's not just about finances.  God calls us to be selfless and to live humbly.  He calls us to give more than we take and to be thankful for everything that we do have.  He gives and takes away and for good reason.

So no puppy for me. 

The end.

Credit Card Series - Part II

Today's post will be extra, extra fun! We're going to talk about the best way to use your credit card.

The main reason why you would get a credit card is to build up your credit.  When you eventually want to take out a loan to buy a house or a car or anything else that you'd need a loan for, the loaner will want to see your credit history and make sure you've historically made all of your payments on time.  Practically speaking, it would be very risky for a loaner to give you a bunch of money without knowing your payment history.  This is why you need at least one credit card to build up your credit.

One of the best ways to build up credit is to use your card, obviously, but you need to use your card strategically. Remember, the point of a credit card is to build up your credit and thus your credit score.  Here are some tips for doing just that:

1) Do not use more than 30% of your credit limit.  If your credit limit is $1000, ideally you should only be putting $300 on your credit card a month.  Having your statement balance more than 30% of your limit can actually drive your credit score down.  I usually spend more than 30% of my limit, but I pay off a portion before the statement ends to ensure that my final monthly statement amount is under the 30% mark, which is totally fine because lenders will only see your final monthly statement numbers.

2) But remember to still use your credit card and have a balance at the end of the month.  You want to show lenders that you can pay your card off.

3) Pay the balance off in full each month.  I know there are a lot of people who pay only the minimum payment, but seriously.... pay off the full balance or you'll get caught in a vicious cycle and fall into credit card debt very quickly.  Get into the habit of paying it all off each month.

4) Don't close any credit card accounts even if you're not using them.  One of the factors that your credit score takes into account is the length of your credit history.  They will actually take an average of the number of months/years you've had each of your credit cards. If you close a credit card, you'll lose the entire credit history along with it. So unless there is an absurd yearly fee with the credit card, just keep it open and leave the balance at zero!

5) Request credit raises once or twice a year.  If you've done a good job at numbers 1-4, it should be pretty easy to get a credit raise.  Nowadays you can just apply online, and it takes literally 2 seconds to be approved.  Sometimes the bank will give you a credit raise without you asking.  Credit raises are great because you'll be able to spend more (remember 30% threshold) and it'll give you some ease of mind.  If for some reason, you ever needed to borrow a lot of money, you have a place to borrow from.  Also, the higher your credit limit, the more likely another lender will let you borrow from them.  If they see that other banks trust you, they will trust you too!

A great place to find out your credit score is Credit Karma.  I was obsessed with this site after college.  It's totally free and will give you a report card of your credit.  Could be a good place to start if you're curious to see how you're doing.

That's all for a Monday.  Have a great week!

Ali

Credit Card Series - Part I

"What's a good credit card?" I've definitely had this question asked more than once.  The truth is, it depends on your spending habits and what you want in benefits.  So, I'm going to list out some things that you might want to consider and some of the most popular cards I've seen amongst people our age.

Things to consider:
1) Why do you want a credit card?  What do you want to use with your credit card benefits?  For example, do you want cash or do you want flight points? Do you want gift cards or do you want statement credits?  Depending on your answers to these questions, your credit card options may change because the rewards are different among the different credit card companies.

2) Where do you spend the most money?  Where are you going to gather the most points?  It's a game, really.  The more you spend, the more points you get and the more points you gather, the more rewards you get.  Some credit cards will give you 5% points on restaurants, while others will give you 1%.  If you only ever use your card on food, it would be wise to get the former.

3) Are you making money? Can you pay off your credit card bills on time? I guess this is the most important and I probably should have put this as the #1 consideration, but this should really effect what credit card you go with.  If for some reason, you only pay the minimum payment each month (which I highly, HIGHLY discourage), you will have to pay interest on the remaining balance, as well.  Depending on the card, this interest rate will vary pretty significantly. 

4) Are you spending enough/gathering enough rewards such that a yearly fee is worth it?  The "better" credit cards (or the cards where you can receive a lot more benefits) usually have a yearly fee.  This can be worth it if you spend enough throughout the year so that the fee is actually cancelled out in benefits.  This is kind of hard to determine until you've actually had the card, but it's just something to consider.

Popular cards amongst our friends:

1) American Express - Everyday Blue Cash
I actually have this card, and to be honest, the rewards really aren't that great. 3% groceries, 2% gas, 1% everything else. I've had a hard time building my rewards with this card, but the card itself looks really cool. 

2) Bank of America - Power Rewards
I also have this card and have seen much better rewards with it compared to my Amex.  I usually use it for statement credit, which is really great.

3) Chase Freedom
A lot of my friends have this one.  It has a neat 5% back on certain items feature and the item changes every few months.  They also usually have a deal when you initially open up the card... i.e. spend $500 in the first 3 months, get $100 back.  I've heard only good things about this one.

4) Chase Sapphire
This is also a popular card in NYC as it gives you double the points on restaurants.  One of my close friends bought a plane ticket to Europe with all of with her credit card points. Note this is a "better" card and there is a yearly fee.

5) GAP/Banana Republic, J.Crew, or other clothing cards
Most of my friends have at least one of these clothing store cards.  I was always told not to get one, but I can see where it can have its perks, especially if you only ever shop at that specific store. I think it would just encourage me to shop more, which is why I've never gotten a store credit card.

Next, we'll be covering how to use the credit card!

Ali