Wednesday, November 23, 2016

First Steps: Personal Finance Toolkit "Bonus Tips"

This post is a follow-up to my recent "First Steps: A Personal Finance Toolkit" post. Previously, I offered a few suggestions that any and every personal finance newbie could and likely should begin with: (1) ensuring that their banking is no-fee, (2) maximizing the interest rate on their savings account(s), and (3) having the lowest-fee investments possible.

Today, I offer a few "bonus tips" that are likely less universally applicable, but still helpful. Once again, no referral or affiliate links here! None of my accounts or cards offer referral programs particularly amenable to sharing on a blog. 

Bonus Tip 1: Utilize online tools and software to better manage your money.

Zero-Based Budgeting Software: One of my long-ago posts recommended YNAB Classic and extolled the virtues of zero-based budgeting software that (a) plans out one's entire budget and spending and (b) tracks all expenses in real time. That approach allowed me to truly understand where my money was going for the first time in my life, and in doing so, transformed my approach to money and opened the door to my building my savings fairly quickly while handling my extremely substantial student debt, not feeling deprived, and still regularly indulging in things like shopping, international travel, and dining out. 

I had thought I was "good with money," before: I saved almost 50% of my (modest, local students' Ph.D-stipend sized) monthly take-home pay while I was working before law school and always paid my credit card balance in full every month. In actuality, I wasn't good with money at all. In America, law school is an often-silly financial decision, though much of that wasn't in my complete control once I had committed. What was in my complete control was (a) not depleting my savings from before law school much quicker than I should have and (b) not living above my means while I was a student though, spoiler alert, I did neither.

I still use YNAB Classic to this day, but it is no longer available to new customers. Personally, I will probably never adopt "new YNAB," mostly because I object to its subscription-based pricing. Other bloggers do use and love it, however. If my copy of YNAB Classic ever stops working, I am fairly certain I will not be joining "nYNAB." Possible alternatives that also use zero-based or envelope-style budgeting, but that I have not personally tested, include Everydollar

Track your Net Worth: I'm a fairly new user of Personal Capital to track my net worth in real time, and I highly recommend it! I'm not certain of whether they are good for non-U.S. based users, but they're able to link up with every U.S.-based banking, investment, and loan repayment account that I maintain. While YNAB Classic also tracks net worth, it requires entering all information manually, which means that investment and loan balances are not tracked in real time, so it isn't as useful for that purpose.

Personal Capital also offers wealth management services for users with at least $25,000 invested, but I will likely never be tempted to explore that option, as I'm perfectly happy with managing my own investments by picking my own low-fee, passively managed index funds. 

Bonus Tip 2: Maximize credit card rewards.

I'm aware that keeping a wide array of credit cards on hand to maximize rewards is not everyone's cup of tea, but I've had a good run with credit card rewardss. When used properly (balances paid in full every month, so there are never any late fees or interest payments to contend with and balance transfer fees or interest rates are irrelevant considerations), credit card rewards confer many benefits or savings with very little additional effort.

I'm not a dedicated credit card "churner" and am unlikely to ever get, say, First Class international plane tickets or luxury hotel stays entirely out of my credit card rewards points. Nonetheless, I do have a few cards that reliably give me decent cash back and travel credit rewards every year with just my usual spending patterns.

Note that, as with many of my personal finance suggestions, these cards are U.S.-only. Also, all of these cards do require a fairly good credit score. If you don't have much of a credit history, you may not be able to start building your credit history with rewards credit cards. My current cards, and how I use them, are as follows:

  • Chase Sapphire Preferred (Visa) - $95 fee/year, after first year - travel rewards 
    • Chase awards one travel rewards point per dollar spent, with double rewards for dining and travel expenses. I typically transfer points to United's MileagePlus program and redeem the points for Star Alliance flights (one Chase point = one United mile). The 50,000 bonus for spending $4,000 in the first three months, by itself, got me two flights within Asia, worth about $400 total, with a few thousand points left over. One can cancel the card after that, before the $95/year fee kicks in for your second year. 
    • In a typical spending year I end up with roughly enough points for three ~$200 dollar flights every two years, which makes the $95/fee arguably "worth it."
    • Many of my peers would now get the Chase Sapphire Reserve instead, which  carries $450/year in fees that will not be waived even in the first year, but gives $300/year in travel credit as well as $100/year refund for Global Entry (includes TSA Pre-Check), which may make the effective fee, for even semi-frequent travelers, as low as $50/year. It also gives airport lounge access, among other perks. I'm considering this card, but I don't travel enough to make it a "sure thing" for me. Also, as a government employee for the year, the very hefty annual fee doesn't appeal to me, even if I plan to get most of it back. 
  • American Express Blue Cash Everyday - no fee - 3% cash back on groceries 
    • I use this card for all grocery store purchases. Cash back is best redeemed as a statement credit, and one must accumulate $25.00 cash back to redeem. At my current rate of grocery spending, I redeem $25.00 about once every three to four months. When I first got this card, there was a $100 cash back bonus for making over $1,000 in purchases in the first three months, but I'm not sure if that's still available.
    • If I ate out less than I do, I'd get the American Express Blue Cash Preferred (6% cash back on groceries, $95/year annual fee) instead. It currently comes with a $150 bonus for over $1,000 in purchases in the first three months. At the moment, I actually cook often enough to make the Preferred card worth it, but that will change when I go back to biglaw.
  • Citi Double Cash Back (Mastercard) - no fee - 2% cash back* 
    • *This card gives 1% cash back at the time of purchase and an extra 1% cash back at the time of repayment. 
    • Like with the American Express, the cash back is redeemed as a statement credit when one accumulates a minimum of $25.00. Some would say it makes more sense to just put all my spending on the Chase card instead as travel rewards can be more valuable than cash back, but I like having the option of having either cash back or travel rewards. 
    • Citi appears to be particularly annoying about verifying your identity when one applies for the card. They made me send in a paystub and my checking account bank statement, which was strange. That had never happened when I applied for other cards.

Other cards that I've considered include the no-fee Ebates card, for an extra 3% cash back on all Ebates-eligible shopping (which is a majority of the clothing, cosmetics, and drugstore product shopping I do), and the United MileagePlus Explorer Card, which is a fee card with the first year fee typically waived,  which I'd then plan to cancel after the first year, before paying the fee for the first time, after getting the bonus MileagePlus points.

Do any of you have favorite credit cards or personal finance software tools? 

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