My New Choice

When 2007 started, we had defined two financial goals for our family.

The first goal was to reduce our non-mortgage debt by 100% and the second goal was to increase our net worth by 35%. Throughout the year I provided monthly recap posts on the progress towards our goal and this post will highlight our final results.

Non-Mortgage Debt
You might recall that as we began 2007, our only non-mortgage debt was a balance transfer that we had with American Express.

The funds were sitting in our online savings account earning us interest and we were paying the minimum monthly payment. As the year progressed and the teaser rate was about to expires, I decided to transfer the remaining balance to a new attractive offer that we had received.

When we made this decision to utilize a new balance transfer offer, we agreed that we would not reach this goal as we preferred to keep the funds in our savings account until the new teaser rate expires in October 2008. As of right now the funds are still sitting in our HSBCDirect savings account earning interest.

Increase Net Worth
After surpassing our goal of increasing our net worth by 25% in 2006, we had set a more aggressive target with an increase of 35% for the year 2007.

We started off very well in 2007 and by mid-year we had already increased our net worth by approximately 20%. In July we experienced the first monthly decrease as the stock market had taken a hit over the last week of the month. Even though we had a decrease, we still expected to reach our goal.

However, during the month of July and early August, we decided to make a few home improvements that we had been contemplating. While we had already saved the money for the replacement windows, we decided to make a few additional improvements at the same time out of convenience.

Since we had not saved the money for the additional improvements ahead of completion, we had a decision to make on how to pay for the home improvements. After much discussion, we decided to use some money from our savings to pay for the improvements and then replenishing those funds over time.

With the decrease in our savings and a relatively lackluster market over the final months of the year, we failed to reach our net worth goal for 2007. We were still able to increase our net worth by a considerable amount, particularly when we consider the improvements that we paid for in our home, so it was not a complete loss.

Plans for 2008
With the teaser rate for our balance transfer set to expire in October, we will again be planning to eliminate all of our non-mortgage debt. At the present time we do not have any plans of extending this offer again but will continue to evaluate any offers that we receive throughout the year.

Even though we missed our goal to increase our net worth by 35% in 2007, we will keep the bar set high and make another attempt at increasing our net worth by 35% in 2008. With the major home improvements having been completed in 2007, we should not have any reason to deplete our savings this year and will have a good chance of reaching our goal.

When it comes to our family finances, we like to set aggressive goals for ourselves as we have found that the challenge can be very rewarding in many ways.

Here is to everyone enjoying a healthy and prosperous year in 2008!

While I was in Las Vegas on business, I received an email from a service that I use that indicated they were unable to reach this blog and it was simply returning a blank page.

With limited time to debug things while traveling, I noticed that a call to the WordPress hook for “wp_head” seemed to be causing the problem. As soon as I removed that line of code, I was able to load the entire page and thought everything was back to normal.

Unfortunately, I failed to spend an adequate amount of time researching the problem and didn’t realize that removing the call to “wp_head” also removed all of the JavaScript and CSS includes that my plugins use to initialize their functionality.

This problem was brought to my attention when I received an email from a reader, Gaida, that had tried to add a comment to a post and received an error message from the comment plugin that I am using on the blog. This was cause for concern and I began to investigate the true cause of the problem that I thought I had resolved earlier.

After adding the call to “wp_head” back into the header file, I was now able to spend the time to look into what was causing the page not to load properly. Since the call to “wp_head” is the hook for all of the plugins, I began by deactivating each of the plugins that I am using. Once all of the plugins were deactivated, I noticed that everything was working properly.

Now it was a simple matter of determining which plugin was the culprit of breaking the site.

One by one, I activated the plugins that I had been using until I found one that caused the site to break again. The first handful of plugins were all working properly but then I activated the Google Analytics plugin and the site broke again. I had found the cause of the problem.

The first thing I did once I had determined which plugin was causing the problem was to check if there was a more current version of the plugin available. There was a more current version of the plugin, which I downloaded and installed. With the new version of the plugin installed, I reactivated the plugin and tested to see if the site was working.

It was still working!

When I initially discovered that there was a problem with my site, I found a quick solution to the problem and thought that everything was working. Unfortunately I had only masked the problem while also introducing additional problems. With the help of Gaida, I realized that there were still problems and took the time to investigate the true cause of the problem.

Now that I have resolved this issue, I know that I need to do a better job of keeping current with the plugins that I am using in order to avoid future problems.

I’d like to thank Gaida for the assistance, as well thank all of you for your patience.

What is the largest denomination of money that you have ever seen?

How about a $1 million dollar bill?

I’m sure we would all love to have one or two of those, unfortunately there is no such thing as a $1 million dollar bill. But that didn’t stop a Georgia man from trying to open a bank account using one.

The man walked into a Georgia bank and attempted to open an account with a $1 million dollar bill, which the teller obviously refused to accept.

The teller called the police while the man began to curse at bank workers. The man, Alexander D. Smith, was charged with disorderly conduct and two counts of forgery.

The aspect of this story that I find amazing is that if someone is skilled enough to create a phony piece of money you would think they would be smart enough to know that nobody is ever going to believe that a $1 million dollar bill is legitimate. Although I guess one could argue that if the person was that smart that they wouldn’t be creating the funny money in the first place.

It is always nice to know that you have money in your pocket during times of crisis and emergencies.

Occasional recreational activities and buying luxury items that you want to purchase can add spice to your life.

How can you possibly have the extra money yet also have a comfortable everyday living? This is what the magic of budgeting can do for you.

Simply put, budgeting is the act of being disciplined and organized in handling your money. Proper personal budgeting is the key to financial freedom. Budgeting does not only have to do with numbers either.

More importantly, it deals with the mental and emotional side of money handling. Financial professionals would love to say that personal budgeting is basically 80% behavior and 20% math. One’s behavior towards money would dictate how he or she uses and saves money.

If you are an impulsive buyer your idea of money is something that you can easily spend because of the fact that you can also easily earn it. With such thinking, you would lose too much money before you even know it.

Budgeting should be done in all honesty, as you are only hurting yourself if you fudge the numbers. You should know how much money you are earning from your regular work as well as any other means of income. Record the numbers that reflect all of your expenses and label the things that you spent the money on. By doing this, you will see how much money is coming out of your pocket everyday.

In evaluating your budget, you should be able to pinpoint the areas where you are spending too much money. It may be the regular nights out at the nearby club or your compulsive need to shop online. As soon as you see your everyday expenses before your very eyes, you will realize if you are living beyond your means and what you can do to cut down on your expenses.

To help you get started with personal budgeting, here are the basic things that you need to do.

• Keep a diary of the things that you purchase, no matter how small. This way, you can monitor your everyday expenditures. Jot down ALL the things that come out of your pocket and also the things that you pay with a credit card.

• Shop with a list. When you decide to head out to the mall or grocery store, it is always a good idea to list down all of the things that you need to buy. Once at the store, stick to your list and only buy the things that you need. Here are a few more tips on how to curb impulse buying.

• Set a limit on the amount of money you will spend. For example, if you are to spend a night at the bar with your friends, you can set a certain budget and do not, at all cost, go over your set limit. This is where you will need discipline to avoid overspending. There is nothing wrong with going out and spending money as long as you establish limits.

• Keep an open mind whenever you are plan to purchase something. Ask yourself: Is this purchase an investment? Is it a necessity? Will I gain something out of this purchase? If the answer to these questions is a yes, then you have yourself a good buy. If you answer no, you might want to hold off on making the purchase.

More than anything, personal budgeting is personal discipline. Keep in mind that you need to budget your money all of the time. With a “budget” mentality you will be able to save up big and live your life in utmost comfort.

As a means of tracking my progress towards my 2007 goals, I am going to be running this as an on-going series of posts. As a bit of background, here are the opening posts in the series:

• September 2007 Update
• August 2007 Update
• July 2007 Update
• June 2007 Update
• May 2007 Update
• April 2007 Update
• March 2007 Update
• February 2007 Update
• January 2007 Update
• 2007 Financial Goals

Non-Mortgage Debt
You may recall that our only non-mortgage debt is the 0% balance transfer offer from Chase that is currently sitting in our online savings account at HSBC. The current plan is to continue making the minimum monthly payment until a month before the teaser rate expires and then transfer the money out of HSBC to pay the final balance.

During the month of September, we reduced our non-mortgage debt by approximately 2% and that will remain fairly steady as we continue with our repayment plan.

It would have been nice to see the online savings accounts stick with the higher interest rates to maximize the earning potential on the funds that we have in savings. But even with the decline in the interest rate, we will still be earning enough to make it worth my time and effort.

Using the 0% balance transfer to our advantage has worked out well for us and earns us a decent amount of money. Granted it is not for everyone but if you have eliminated all of your consumer debt, it is something to consider.

Increase Net Worth
October brought another positive gain to our net worth, although it was less of an increase than we had last month. The increase to our net worth in October was approximately 1.4%.

We recently opened a new checking account and we have directed a portion of the funds that were intended for our eFund to build a small cushion in the checking account. With our checking account, I prefer to maintain a cushion just to allow some flexibility and have a small surplus should expenses increase in a given month.

Plans for November
The year is quickly coming to a close and the holiday season is upon us. We have already completed the majority of our Christmas shopping, although we will likely still pick up an item here and there if we see a great sale somewhere.

I am somewhat disappointed as I had been shooting to see our net worth increase more than it had in September and we fell short. For the month of November, I would like to see an increase over October to gain a little ground. With only two months left in the year, it looks like we will miss our goal of a 35% increase to our net worth but I still want to see how close we can get.

Hope you are doing well on your financial goals!

You might have heard of stories about credit card debts gone real bad, maybe you have even lived that story.

Many people would tell you that credit cards are just like cashless shopping. Unfortunately this gives some people the notion that with a credit card they can spend as much money as they want, but at the end of the day remember that you still have to pay for all the things that you purchased.

When you realize that you do not have enough money to pay for your credit card bills, then this is when the real nightmare begins.

As always, discipline is the key in handling your finances, including your credit card usage. You should use your credit card wisely from the first day that you have it. Here are some tips to guide you on how you can take advantage of your credit card and not the other way around:

• Only use your credit card when necessary. If you have some cash with you, spend it rather than using your credit card. This way, you would use your credit card only in rare occasions or in case of emergencies. Some people like to use a credit card for everything to build rewards or rebates, which can work well as long as you maintain discipline and follow the remainder of these tips.

• You can save a big chunk of money if you pay your credit card bills on time all the time. By paying your bills promptly can help you avoid late fees. Not only will you avoid late fees but you will also benefit your FICO score, as timely payments is one of the 5 steps to improve your credit score.

• Do not go over your credit card spending limit. This way, you would not have to pay more for penalties. By avoiding fees and penalties, you will prevent yourself from digging a deeper hole each month.

• It is not a good idea to have a truckload of credit cards in your wallet. One or two credit cards should be sufficient. Make sure that you choose a credit card that suits your needs, your budget and most especially, your lifestyle. Having too many credit cards may just tempt you to spend more. Juggling payments and due dates between numerous credit cards may also cause confusion and increase the chance of missing a payment.

• Request a due date that is convenient to your normal payment schedule. So that you can be reminded of your credit card bill, request that your due date be set on the same time that you pay your monthly bills like your electricity, water bill and mortgage payments.

• When using your credit card, pretend like you are spending cash. This means you must spend only what you can pay for. If you have a regular monthly income of a certain amount, then do not go over your limit at all cost.

• Keep all receipts of your credit card purchases. Make sure that they coincide with your credit card’s monthly statement. Report any discrepancies and unauthorized use of your card if you see something amiss with your bill.

Using your credit card responsibly will help build a positive credit history as well. Maintaining a good credit history is very important, particularly if you foresee a need for a mortgage, car loan, or any other type of loan. If you’re currently carrying a large amount of credit card debt, it is not too late to make progress.

Start following these tips today and begin using your credit cards properly!

Living below your means may not seem to be the best way to live your life, but if you wanted to be debt free, then this is the way to go.

Living below your means does not mean that you have to live life like a poor man.

It simply means that you have to apply some amount of discipline in handling your finances.

Even with the popularity of credit cards and loans, you should only spend on the things that you can afford. Living beyond your means would not only get you into trouble but could also lead you into the deep pit of debts.

As the famous Benjamin Franklin once said, “a penny saved is a penny earned.” Imagine the things that you can save when you live below your means. Being responsible in handling your money is the first step in living a debt free life. To get you started, here are some tips:

• Take a look at your budget. You should be able to know how much you earn on a monthly basis. With your earnings in mind, make sure to spend only on the things that you can afford.

• Keep a log of your expenses. Mark the things that are eating up a big part of your budget and cut down on them.

• Get rid of unnecessary things. Avoid alcohol and cigarettes. This would not only allow you to save up big, it would also assure you of a healthier life.

• Office meals tend to be quite pricey. It would be a good idea to prepare your lunch at home and bring it to the office. As much as you can, say no to junk foods and sodas.

• Find the gas station that offers the cheapest rates. If you can, join carpools on your way to the office.

• Most people love dining out. Why not try something new? Learn to cook! Not only would you enhance your creativity, you would also be surprised on how much you can save.

• Only use your credit cards in cash of emergency or if you suddenly ran out of cash. Always pay your monthly bills on time to avoid paying more than you should on late fees and penalties. If you have more than one card, always prioritize the card with the highest interest and pay it first.

• Living below your means does not mean that you have to stay in your house all the time, you can go out and enjoy! If you want to go on a vacation, book in advance so that you can have the cheapest rate that airlines and travel agencies have to offer.

• Shop wisely. Thanks to online stores, you can now save as much as 50% on products that you see in the usual retail stores. You can also use discount coupons and promo codes to save even more.

Living beyond your means take a lot of sacrifices. Use your common sense and practicality in handling your money. A little discipline can save you real big!

Many people wrongly assume that closing down credit card accounts will either prevent them from getting into more debt or even help their credit score, but this is a misconception. It’s important to differentiate the right and wrong reasons for shutting down open accounts.

Good reasons to close a credit card account:

• You are the victim of identity theft
• You are worried a co-signer might rack up debts (for example, an ex spouse or family member)
• Your credit card company is charging you ridiculous fees it won’t waive, like a high annual fee
• Your financial institution is unstable or uses unethical practices

Wrong reasons to close a credit card account:

• You’ve finally paid down a credit card and you figure closing it down will make you appear more responsible on your credit report
• You’ve recently obtained a lower interest credit card and want to close an older, higher interest card
• You’re afraid you have too much available credit
• You can’t control your spending and want to shut down all available credit sources

Why are these poor reasons to close accounts? Credit score is based on a number of factors including the age of your accounts - credit lenders like to see that you have been loyal to your creditors. One of the benefits of owning a credit card earlier in life is to establish good credit history. Closing your older accounts immediately cuts down your credit history.

Another factor is your debt:credit ratio.

Also, older accounts are likely to have higher limits as credit card companies will bump up limits for customers in good standing every six months or so.

It’s much better to have $15,000 available credit and use only $5,000 of it than to make a balance transfer to a new card with a $5,000 limit and close your older, $10,000 limit account. You will jump from a decent 30% debt-to-credit ratio to a dismal 100%. So if you are going to close inactive accounts, choose more recent ones with low credit limits. But you probably don’t even need to close them. You can’t have too much available credit unless you’re too tempted to rack up higher bills. In that case, you can cut up your physical cards while leaving the accounts open.

When leaving old accounts open, it’s a good idea to use the card at least once every six months to make sure your credit lender does not close your account for you due to inactivity which would negatively impact your credit report. You could set up automatic payments for cellphone bills or monthly charitable donations for your older, higher interest cards to keep them active, and connect them to your online banking service, making sure to pay in full each month.

If you do need to close down accounts, it’s best to do so gradually, at a rate of one per month as closing down multiple accounts in a short period of time can trigger a temporary drop in credit score.

About Retail and Gas Credit Cards

Credit cards issued by retail stores or gas stations (unless they are Visa or Mastercard with retail or gas rewards) are not as beneficial credit references as regular cards because many use less reliable, smaller financial companies and they also approve almost anyone who applies. Some have even suggested that each retail store credit card you open lowers your credit score by 20 points.

These types of credit cards come with crushing interest rates in exchange for rewards points or discounts. Many department stores try to lure you into signing up with discounts off your initial purchase. Because these are lower value forms of credit, don’t just sign up to get a one-time perk. Only sign on for stores you will shop frequently in and that you will be able to pay off the balances each month.

About the Guest Blogger:

Linda Bustos is an editor for CreditorWeb, where you can learn about credit cards, identity theft, understanding credit reports and more. She is also an active member of the Destroy Debt Forum.