This blog is intended for educational purposes only. None of these posts are meant to give legal or financial advice. If you need advice you should consult an appropriate professional.

Tuesday, August 27, 2013

use credit cards to your advantage

Credit cards are very common these days.  They're one choice of payment among many.  You can pay with cash, check(who does that anymore), debit card, or credit card.  The way the bank wants you to use credit cards and the way you want to use them are two different things.  Two very different things!  You should also be aware that you have more recourse with a credit card than with cash or check if something goes wrong with your purchase.  You can dispute charges if you have a legitimate reason.  Once you spend cash it's gone.  The technique I like to use is what I call rebate maximization.  A rebate is simply a percentage of the purchase price that you get back in the form of cash, gift cards, or frequent-flyer miles.  If you don't have rebates on your credit card consider getting a card that has some kind of reward for using it.  There's no reason these days to not have a card with a reward program.  Almost every credit card has them nowadays.  In my head I have the statement closing date memorized for each card I have.  This is so I can have the card paid off before the statement even cycles.  You don't have to do this, but just make sure you pay off the balance before the grace period ends.  The grace period usually lasts 20 days or so after the statement cycles.  If you don't retire the balance before the end of the grace period then you start to pay interest.  You're then known as a revolver my friend, and believe me you don't want to go there.  Build wealth for you and your family not for everyone else.  I'm not against credit cards at all.  I think they can be used in a beneficial way for the customer.  Even when you pay your balance off monthly the bank, network, and processor still make money on each transaction.  The merchant selling you the stuff usually takes the hit and collects less than if someone had paid with cash.  Some cards make money on annual fees too.  If you collect enough rewards on the card and spend enough an annual fee may be justified.  I try not to spend anymore than I would've if I'd used cash.  There are some studies that say people spend more on credit cards than they would've spent paying cash.  That may be true.  The best thing is to be aware and try not to do that.   I mainly use cash in my daily life.  I'm so scared of debt that I always have a plan in place with any amount I put on a credit card.  I keep a mental tab of every amount I owe on each card.  With rebates try to find a card that gives you the rewards that you like.  I just had a big bill due recently.  The organization accepted credit cards as payment so I paid the bill with the card that would give me the most back in rebates.  I then promptly paid the balance off.  And there was one card in particular out of the cards I have that gave me more than the others.  That's what I mean by rebate maximization.  Use the card in each purchase that gives you the most back.  Simple as that.  Then pay the balance off before the grace period ends.  Credit card companies make money through interest and fees just like a bank.  Make it a goal not to pay either.  Credit cards can be a useful tool if used with extreme caution.  Use them in a way that benefits you.    

Monday, August 26, 2013

buying a piece of capitalism

The world is largely capitalist.  That means the means of production are privately owned and run for profit.  So private property and profit.  Easy enough.  How does the average person get in on this?  How does the person on the street get to participate?  The easiest and possibly best way for the common man/woman to become a capitalist is to buy shares in publicly traded companies.  This is known as buying stock.  The stock market is as democratic as it's ever been.  You don't have to be rich to invest by any stretch of the imagination.  Anyone can open a brokerage account and put their money to work.  There are a few options.  You can buy shares in a mutual fund which is indirect stock ownership.  This is the way most people participate via their retirement account at work or on their own.  Another way is to open up a brokerage account and buy shares in what is called street name.  That means the shares are in the name of the broker, but they are your shares.  One more way to buy shares is directly through the company or their transfer agent.  Sometimes you can buy the first share from the company, but other times you must have a share in certificate form to get started.  That part about having the stock certificate to get started is definitely a pain.  These plans are called direct stock purchase plans for new shareholders and dividend reinvestment plans for existing shareholders with at least one share in certificate form.  I myself buy stocks through a discount broker and a mutual fund company for simplicity.  There are other ways to be a capitalist.  You could start your own business or be a real estate investor.  People have made money with entrepreneurship and real estate.  All I'm saying about those two options is they are more complicated and usually require a lot more money.  I like to stress things that anyone can do.  Are stocks risky?  Yes.  I know of no way to make money without some type of risk.  Do stocks always go up?  No no no.  If you can't tolerate the value of your investment going up and down don't buy stocks.  The stock market has never been more available to the average person.  It's a way for you to benefit from this marvelous economic system.

Thursday, August 8, 2013

The trap of government assistance

A little help from the government never hurt anyone right?  Yes it has!  I don't think many people would argue that the economy has not been good for many years now.  Lack of jobs and savings have led many people to get on some kind of government check.  Hey we all have to survive.  I don't fault people for trying to keep their heads above water.  The trouble with taking the king's money is you will dance to the king's music.  Better to sling hash yourself even if it's a low level job.  Life is harsh at times!  No doubt there.  The people that write the laws for government programs don't really know what it's like to depend on the state to provide survival.  It's a huge impediment to actually doing anything with your life and being a productive citizen.  Government assistance is a huge trap!  Can anyone say strings attached.  More like ropes.  And the person on the end of the strings is the puppet.  I myself was on a government check for a number of years.  And believe me the years go by fast.  I have just recently told that program to take their money and shove it.  I was always thinking I can't do this because they'll take my benefits away.  I can't work because they'll come after me for the money.  I can't get married because they'll count my spouse's income against my benefit.  I can't invest because any profits I make will be taken away.  And hey maybe as your friendly government agency we'll hassle you even if you don't make a profit but simply sell some investments at a loss.  Believe me it's no way to live.  It's better than being on the streets, but even saying that sometimes I wonder.  Yes I did have a safety net, but I also had a thick concrete ceiling I couldn't get through.  The benefit I was on was like a walking prison.  I never felt like the money was mine.  Probably because it wasn't!  America has become a country of government dependents.  This is not good!  We need more freedom not less.  In the early days of our country people thought differently.  They thought about how they could take care of themselves.  If you're considering getting on a government program I would say tread with extreme caution.  Some things are easier to get on than they are to get off.