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Tuesday, December 1, 2015

Credit Card with the Highest Overall Rewards

I need a new non-AMEX credit card. And, I've found two great cards for rewards on all purchases. It's incredibly difficult to keep track which card should be used at which store or category of store. Furthermore, my boyfriend and I share expenses and have mutual bank accounts but not a shared credit card. Thus, most of our expenses like groceries are made with the bank card that has no rewards. On my to do list is to research one of us using a card that has the most benefits on our top spending categories: restaurants and groceries. 

Here are the two contenders I found for a new card for myself:

1. Citi Double Cash Back Card - offers 1% back on purchases and 1% back on all payments for a total of 2% back

2. Priceline Card - offers 2% back on all purchases plus bonus % on certain categories of Priceline purchases

The verdict: Citi Double Cash Back Card because the card itself has a better design and my boyfriend already has a Priceline card, which we use on all Priceline purchases. Diversifying the card benefits in one household makes sense. 

Monday, November 30, 2015

Minimum Viable Money Management

I've been learning quiet a bit about agile development and lean management in the past two years of the MBA program and now I am using this same methodology at my job in relation to business processes. MVPs are the new hot topic in business, discussed in more detail in Eric Reis' The Lean Startup.

"A Minimum Viable Product (MVP) is: "[the] version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort" — Eric Ries." Google

In simpler terms, an MVP is a product, for example, a mobile app, that is developed quickly and released to the customers before there is time to put on the finishing touches. Releasing the product to the customer quickly lets you learn from feedback and fail fast if you are going in the wrong direction. This process allows you to spend minimal funds on a progressively better product. You can know the biggest needs of the customer (or if the product is needed at all) before you spend money on the final logo of the application, for example. 

Viable is a key term in this phrase. Viable means that the product might not have all the features, but it is useable by the intended audience. 

The idea is that this process is efficient. No money or time is wasted, no resources are misused or idle. I love lean management and believe that efficiency is key to running a smooth machine that is a business. 

I look at myself and my money management as a small business. I have a resource (my own potential), a revenue source (my income), and expenses (rent, food, etc.). Thus, I translated the lean management techniques into personal finance and am piloting and learning from my experience. 

What does that mean? Firstly, I have decided that my job is stable enough and my paychecks are large enough that I do not need an emergency fund at the moment. I don't own a home or a car and I planned to keep $5K in my saving account for emergencies. I might not have that money at any one moment, but I can gather it within a 2 week period. Thus, now while I am trying to attack my student loans with everything I have, why keep $5K in the account idle? Remember that viable for a product means useable and for a process: doable, which means you have to be careful not to be so lean as to miss payments on credit cards due to a low cash balance. 

Secondly, I've always cleared my credit card with regularity. I would sometimes pay the card off once or twice a week just so I know the true amount of cash I had left and for simplicity purposes. Now, for simplicity in calculations, I might pay a small amount on my cards to round the amount down at any one time, but I no longer pay the full amount until the actual due date. The reasoning for this method is that if there are two paychecks between today and when a credit card payment is due, then instead of paying my credit card today (which accumilates no interest) and my student loan in a week (which does accumulate interest), I can prioritize whom I pay first from each paycheck based on the interest %. It sounds complicated and will require you to calculate how much you will have to dedicate from your paycheck that is paid out on the closest to the credit card due date towards that credit card payment, but it will save you in interest costs. If you have automatic payments set up on your student loans (or a mortgage), you can pay the amount due earlier and, usually, a second payment will not be automatically deducted on the due date. Do check with your loan provider. Why wait for the due date when you have the money today and when the money will be idle in your bank account until the payment date?

Thirdly, I'm delaying putting anything in my Roth IRA until right before April 15th. I'm generally risk averse, thus, I want to put the money in my Roth IRA because it is a smart move. Yet, instead of putting a little away every month, I'm going to stash a lump sum before the deadline from my March and April paychecks. This method allows me to put funds where they are needed today - student loans. This choice might be contentious for some. Yes, I loose out on the benefit of dollar cost averaging and of possibly making a good return in the market. Yet, the greatest value for me right now comes from decreasing my debt. That piece of mind is worth this move. 

I am also in need of a credit card that is not an AMEX, so I'm looking at options with the best rewards, but I am also seeking a 0% APR introductory offer so I can put one of my student loans that is $6K on a credit card. The reason for this move is that I would pay a small fee to pay that student loan off with a card, yet, I can focus on paying higher interest loans off with those funds instead of paying the $6K one down monthly. Overall, calculating the return of being able to snowball money intended for this loan into a higher interest loan and returning to this $6K one on the credit card before any credit card interest is due will save me close to $300, even after I pay the service fee for paying the loan off with a credit card. 

I have also raised my deductions for my paycheck. I am used to receiving a refund and because the refund is never significant, I never played around with my withholdings. Well, now I have and now I am plowing more money towards - you guessed it - student loans. I can calculate the refund or the amount due by the end of January and save up if needed through April 15th.

Overall, I've become more conscious of giving away "free money." In the past, I've paid for rent months in advance or pre-paid on other services I know I would be using like insurance. However, now, unless the service will benefit me via a discount that is greater than the interest I am paying on my student loans for not directing those funds to loans, then I do not pre pay anything. I also withdraw my Venmo and PayPal money from eBay after each transaction instead of transferring when I remember. Why give my landlord or eBay an interest free loan?

There are many more strategies where you can make the dollar work for you. It might be tedious, but if you are looking to save money on interest - these strategies could be useful and will become routine after doing it for some time. Something that has kept me motivated and swung my decisions has been an Excel I have been keeping that keeps track of the interest savings from paying down my loans first then my credit card on its actual due date. Overall, I've saved several hundred dollars in interest from a combination of these strategies. 

Comment to share any of your strategies for Minimum Viable Money Management. 

Thursday, March 5, 2015

Mutual Fund Alphabet

Stock tickers are based on the companies name, however, mutual fund ticker names are based on the name as well as other factors such as how much you are going to pay in fees. Here is the break down of the names:

Ends on:

A - you pay comission
N - no-load (no fees)
F - front end load
B - fund has both front end and back end fees
X - ending for most mutual funds to differentiate the ticker symbol as a symbol for a mutual fund

Fresh MBA Grad

There has been progress in my financial life. I'm graduating from an MBA program in May 2015 with a lucrative job offer to start in July 2015.

I have more than tripled my salary, but I have also more than tripled my debt. So, I need a new set of financial goals as should you anytime you undergo life changing events.

1. Contribute to 401(k) up to the match (6% of base salary)
2. Build emergency fund of 3 months (my job feels secure so this should be enough and this will be possible with part of the signing bonus)
3. Max out Roth IRA (this will also be covered by the signing bonus)
4. Pay down high interest government debt, undergraduate subsidized loans
5. Pay down high interest government and direct debt, graduate plus loans and university loans
6. Pay down low interest private graduate loans
7. Max out my 401(k)
8. Save up for a down payment (for potential 2017 house purchase)

Monday, April 21, 2014

Maximum Amount of Student Loans

The government will only give you a few thousand dollars a year in loans to pay for your school. If you are reading the Money Smart Grad blog, you are likely to be a college grad with student loans. Therefore, you know the damage that they can do. You might have some extra PLUS loans or private loans as well. You might be thinking of going to grad school, which probably means that you will need even more loans on top of what you already have.

To tell how much you should take out in loans, you should look at the salaries of potential careers you can undertake after graduation. For example, I am planning on an MBA and I am researching how much a manager or a director of a firm or a non-profit can make and what I need to land that position. If you would qualify for a listing after graduation, and the position pays $100K and that seems to be the average, you should not take out more than a total of $100K in loans in total. A good rule of thumb is to never take out more loans than you will make the first year out of college or grad school. This means that if you are going to grad school and you expect to make $100K the first year, but you already have $25K in undergraduate loans, you should only take out $75K more for a total of $100K.

Recommendation: Squared Away Blog

I'd like to recommend something that I read regularly - the Squared Away Blog by Boston College. They have a great research center and conduct regular academic studies on topics of retirement. Do check it out!

Thursday, August 16, 2012

Statistic Brain

Interesting Statistic, financially and otherwise. Here is a list to the Retirement Statistics:

Retirement Statistics

Click through the financial tab on top for more fun info.