Reading Books: Get a Financial Life June 19, 2011

No matter how much I think I know about personal finance, I’m always willing to learn more.  So when I heard about Beth Kobliner‘s updated edition of Get A Financial Life:  Personal finance in your twenties and thirties, I knew I had a book to add to my reading list.

My overall impression of this book:  READ THIS BOOK!  I think it’s a great book, both for the recent grads as well as people still trying to take control of their finances.  Plus, the updated version reflects the current economic situation as well as newer tax codes, so you won’t hear the old general advice that has since been debunked.  The book is divided into sections that guide you how to get your financial life in order by examining your budget, managing/paying off your debt, finding the right banks for your checking AND saving needs, and other steps and decisions like investing, setting up and contributing to retirement funds, buying vs. renting, selecting insurance (health, disability, life, car, homeowners/renters, etc.), and filing your taxes.

The thing I really liked about these different sections was that they had actual information and resources included.  It wasn’t merely things like “make a budget”, “open a 401(k)”, and “check out mutual funds”.  There were actual explanations about the benefits and drawbacks of a lot of financial choices, as well as in-depth information and examples of the consequences if these decisions.  I definitely learned some things I didn’t know before!  I learned a lot about the different income limits for different retirement funds, and the amount of coverage I should be buying for my car insurance.  I got a better idea about all the different investment options, and the difference between mutual funds, bond funds, and the tax implications of investing in these different funds.  She includes lots of information that, had it been my personal copy (and not a library copy) I would have gotten out highlighters and post-its to remind myself of the important information.  Throughout, she provides links to websites and calculators (which would be even more handy in an ebook format where you could click-through to the sites), as well as recommended books for further reading on each subject.

So, I’ll reiterate:  Read this book.  I took a lot of notes for myself while reading this book.  It got me thinking about my current financial setup and how I can improve it.  And maybe I might even buy myself a copy so I can highlight the important points that I will want to come back to (there was a lot of useful information for homebuyers that I don’t need right now, but will need in the future). Plus there’s a great list of resources at the end of the book (more books, magazines, blogs, websites, etc.) that will help me add to my to-read list.

Have you read the book?  What do you think?  I’d recommend it to pretty much anyone!  Buy it for recent grads!  They’ll grumble at being told what to do, but they’ll appreciate it

Do you chase credit card rewards? June 12, 2011

I got my first credit card after I graduated college.  Applied for some that my bank offered, and got two, a Visa and an American Express.  I only applied for cards with cashback or other rewards that could be translated into money back.  Later I applied for the Chase Freedom credit card when I got an offer that came with a  $100 bonus.  I think I also signed up again to get a $50 bonus, but soon cancelled that account when I realized how stupid it was to have two identical credit cards.

I also have signed up for store credit cards.  I know, those are the ones that personal finance people tell you to stay away from.  You’re usually tempted at the checkout by the inciting 15% off your purchases.  Which only benefits you if you pay off the credit card.  Otherwise, those few dollars you saved are erased by the ridiculous interest rates that most store cards have.  My store cards that I have (for the top 3 stores I shop at) all have interest rates above 20%.  Of course, if you pay the cards off every month, the cards do tend to have decent benefits (sales, extra coupons, or “cashback” in the form of coupons off future purchases based on how much you’ve spent).

I’ve never signed up for a train or airlines card; I don’t stick to one airline, and don’t fly very often (except apparently this year).

I read a lot of articles on Free Money Finance explaining how to take advantage of the different rewards programs that credit card companies offer.  FMF is very adamant about using cashback cards to your advantage.  Some cards give higher rewards than others, and some will reward certain categories of expenses.  I don’t think I come out with as much rewards money as FMF does…I don’t spend nearly as much.

My theory on the matter is that your technique to maximize rewards shouldn’t be too insane.  What do I do?

*Most of my day-to-day transactions are put on my credit card.  As I’ve mentioned before, I’m all about the points.  I guess I feel a little more free to spend money if I’m getting 1% off…not really the best mental game to be playing.  I do spend cash when I go out to eat with friends if it makes the paying of the bill easier.  And most cabs don’t take credit.  But I just don’t like keeping a lot of cash on me.  Plus using credit makes keeping track of my expenses a lot easier.

*When I shop at stores I have store cards for (Kohl’s, Gap, and LOFT), I’ll use them.  You are sometimes required to use those cards to get discounts, plus I can earn future spending money or added benefits by using my cards.

*I use my Chase Freedom card almost exclusively (except for at those stores I mentioned above).  It has rewards that are simple to understand, and tend to have bonus categories that I actually use.

*Every once in a while, I’ll get an offer from my bank telling me I’ll get bonus points for using their card for specific purchases.  If those categories aren’t currently the bonus categories on the Chase Freedom card, I’ll go ahead and use those cards to take advantage of the bonus points.  But those offers only come every once in a while (when I haven’t used my card in a while!)

*I recently had to buy a bunch of plane tickets for the two weddings I’m attending this year, as well as for a family reunion.  I’ve found that if you go through your credit card’s shopping site/rewards site, you can earn additional “points”.  For my Chase Freedom card, I went through their Ultimate Rewards program.   It’s like following an affiliate link; they know you came from their site, and then will reward you with additional points, either a flat amount or a certain percentage of your purchase.  So when I discovered that going directly through JetBlue‘s website or through a flight search site (like Travelocity) would cost me the same, I chose to go through Travelocity through the Ultimate Rewards site, and will be getting additional cashback for doing so.  Easy Peasy.

There are similar programs if you have a card that is part of the WorldPoints program.  You can shop through their WorldPointsMall.  If you have a Bank of America credit card, you can shop through their Add It Up program.

To be honest, since I don’t buy a lot of things online, I’ve only ever used these sites for buying plane tickets.  And maybe once when I ordered flowers for my mom.

As a note, I’m not getting paid or any other benefits for reviewing this.  Just going over what I do.

So, how intense is your credit card rewards optimization?  Do you juggle lots of cards, each for a specific purchase, to maximize your rewards returns?  Do you find any of this worth the time and effort?  Do you use other card types?