Gas prices have been out of control lately. Now that Melissa is driving to school everyday, our monthly gas costs have gotten much higher and our budget is feeling the pinch (or should I say punch).
We do have a plan for reducing our gas costs outside of the obvious suggestion of driving less.
First, using the Internet we can find the cheapest gas around. Personally I prefer Gas Price Watch. There is a good article with several options for finding cheap gas at Search Engine Watch. The article is a bit dated, but the few links I checked beyond Gas Price Watch still had some useful information.
Even though I like to confirm the information on the Internet, I know the cheapest place in our area already. There is a huge Mr. Car Wash nearby with a ton of pumps that uses cheaper gas prices to pull in more folks. I try to fill up at that location exclusively and judging by the traffic, I’m not the only one.
This location’s strategy relies on high volume and upselling with their car washes and oil changes (both heavily advertised). They even have unique gifts like local jellys and gifts inside the store. I bet they more than make up for the cheaper gas prices through these other services. This isn’t an issue for me as I generally won’t pay to get my car washed – it’s just too expensive – and I always pay at the pump so I avoid all temptation by not even going inside the store.
Another way we’re looking to save money at the pump is through our credit card. We have a Citibank Driver’s Edge card and get 3% back on gas and automotive purchases (as well as on grocery store purchases – our other big expense every month.) We took a while to choose our credit card and now it’s paying off. By transferring our Driver’s Edge rewards points to ThankYou network points, we can get rewards of $50 Shell gift cards.
Originally we wanted to use our reward points to get gift cards to chain restaurants so we could eat out without affecting our budget. These days we eat nearly all of our meals in as Melissa practices new techniques for culinary school. When we do get a chance to go out, we rarely want to go to a chain restaurant but instead want to try new and interesting foods.
Because we haven’t been choosing the same old restaurants (the only restaurants for which we can use our ThankYou reward points), we have a backlog of unspent points that will now be buying us gas. Even just one giftcard will make a noticeable dent in our monthly gasoline purchases. Short of changing to a motorcycle for a commute, I think this will be one of our best bets for helping our budget absorb higher gas prices in the short term.
So what are you doing to save money on your fuel costs? How has it affected your household?
Image Source: A_Siegel
I talked briefly in the past about how I was considering playing the arbitrage game for some of our big purchases for the new house. We had the opportunity to get no payments and no interest for one year on two of our big purchases. We are going to take advantage of that and try to earn a few more bucks for ourselves.
We had saved the money for both of these purchases, but instead of paying them off right away, we are going to invest the money for part of the time in a 6 month CD, and for the remainder of the time in a money market or high-yield savings (whichever looks better at the time).
We have approximately $6000 we are going to invest for this.
Now, we’re only doing this because we already have the money and we are not getting things outside of what we had planned for. We have developed the discipline not to go spending this cash when we know we are holding debt. If I didn’t feel disciplined enough I probably wouldn’t be trying this.
We used Bankrate.com to determine where we could get the most money. In this case, Countrywide was the top but required a minimum investment of $10,000. The second best was E-Trade at 5.25% and the minimum was $1000 which we qualified for.
If we were more risk-takers, we might consider investing in the stock market. However, with the possibility of the investment losing money and leaving us with debt that wasn’t really an option. We didn’t feel like taking that risk where others might be more than happy to take that risk.
The yield from the 6 month CD would be $160. Not a huge sum of money, but nothing to scoff at either. That’s a summertime electric bill. You can find calculators for CDs at Bankrate.com too.
The remainder of the time (5 months) we’ll put the money in the E-Trade savings account which is currently paying 4.93% and is compounded daily. There are higher interest rates, but weighing more accounts vs. getting a good (but not the best) rate where I already have an account made us decide to keep the money at E-Trade.
So, taking the $6160 and investing it for those 5 months at 4.93% interest compounded daily yields $6209 or another $49.
So overall we’ll have over $200 we’ve earned and we’ll still be paying off the debt a full month early. Again, not a huge amount of money, but there is a lot you can do with $200.
Image source *** Fanch The System !!! ***
At the beginning of the year, we were able to declare ourselves “debt free”. This was no easy task I can tell you. We still have our mortgage, but we don’t consider it debt exactly. Certainly, it is debt, but it’s at a decent interest rate, we get a tax deduction for our interest payments, and if it’s our only debt, to me that’s “debt free”.
We managed to pay off both of our car loans early. We also eliminated all of our credit card debt this year. We did both of these primarily through some major changes in lifestyle (especially our eating habits – dining out can cost a fortune!)
Now that we are debt free, we have no intention of going back. We’ve made several changes in our life to help us not slide back into that “bad place”. Some of these changes include:
- A strict budget – Not so strict we have to beat ourselves for an overage, but a guideline we shoot for with appropriate flexibility in certain areas. The budget helps ensure we live below our means, and that we plan for savings.
- Our non-emergency emergency fund – This ensures that we never have to maintain a balance on our credit cards even when we go over more than our flexibility allows (up to a few hundred dollars).
- Our emergency fund – This way we can handle even those big cases where we have an emergency. We’re very strict about this being used only for emergencies. Our goal is to eventually build up 6 months living expenses (bare minimum living expenses).
- Delaying gratification – Like the iPhone incident of last weekend – I’m no longer going to just indulge myself. All of my upcoming purchases will be planned, and will require taking part of the budget and setting it aside for purchase in the future. This also ensures that when I do indulge myself, it’s not impulsive, and it’s something I’ve researched and know that I want. Oh, and that I find the best deal.
- We will drive our cars until they can drive no more - Consumer reports says that can save up to $31,000. For me, a car gets me from a to b, and doesn’t need to be anything fancy. It felt weird typing that, but that’s how much I’ve changed recently. I used to want a flashy car, but now I’d rather save and invest my money.
- Find the best deals – I want to understand how much something costs, where I can get the best deal, and make sure I’m not getting ripped off. In the past, I didn’t always bother to research and find the best deal, and convenience was usually the motivating factor. There isn’t anything wrong with convenience, but now I will measure that against other factors.
So, with these things in place, and barring any serious emergencies (like something medical), I think we can remain debt free. We have to remain strict and follow this plan. We cannot allow ourselves to fall back into the “old ways”.
I’d love to hear from other folks who managed to get out of debt. Do you have a plan to remain debt free?
Image source :Daquella Manera
Recently, my wife and I were looking at our credit cards. We got to thinking about credit cards after reading a post over at The Simple Dollar, and decided to consider changing our card. At the time, we had no idea we’d wind up with the same card that was discussed there.
I’ve had the Citibank AAdvantage card for years. In my previous job, I traveled constantly and racked up many, many miles on American Airlines. I used this card to increase the number of miles I had (I had a goal of hitting a million before travel burnout kicked in). Even though I quit that job years ago I still had this card (and was still racking up miles). After flying so much for work I have little interest in flying for pleasure right now. Earning more miles was no longer a valuable benefit to me and on top of that I was being charged a yearly fee for those rewards. It was time to change cards to get a rewards program that made sense for our current lifestyle.
We view credit cards as a convenient way to make purchases and earn rewards. We use them extensively but we always pay the balance off in full every month so we don’t pay interest.
Our criteria for choosing our card :
- It had to be with Citi. This is because of our relatively long history with them. Although the card number would change, my credit still reports a long history because I’ve stayed with the same company for so long.
- It had to support virtual credit card numbers. We use these almost exclusively for online (and even some offline) purchases.
- It had to provide rewards in the way of cash or in a way that was roughly equivalent to cash (e.g. gift cards, reimbursement for expenses, etc..)
- It had to have a low interest rate. Although we don’t allow ourselves run a balance we wanted a low interest rate in case we hit emergencies beyond the amount in our emergency fund. We hope to never have to worry about this.
Armed with this, we went to the Citicards site to see which cards made the most sense. Citi has a nice utility to help you find the right card by allowing you to choose the features that are important to you. We selected Cash Back, and No Annual Fee for our search. All the other options didn’t really matter much to us. We were left with just a few (non-business) cards to look at :
- Citibank Options Platinum Driver’s Edge
- Citibank Dividend Platinum Select
- AT&T Universal Savings Platinum Card
- Citi Dividend American Express Card
- Citi Cash Returns Card
- Citi Professional Cash Card
- Citi UPromise Platinum Select Card
- Citi Home Rebate Platinum Select Mastercard
Whew! How many adjectives can you use to describe a credit card?
We quickly eliminated the American Express (not always accepted), the UPromise card (we don’t have children), and the Home Rebate (we are already all set to move into a new home).
That left us with 5. We started reviewing the terms and conditions on each of these cards (you should go to their website for the latest information – this data could be old, but seemed to be valid at the time we checked) :
- Citibank Dividend Platinum Select – 2% on purchases made at supermarkets, drugstores, gas stations, convenience stores, and utilities including cable, 1% on everything else. Maximum of $300 back (with some exceptions for special purchases)
- Citibank Options Platinum Driver’s Edge – 3% rebates on purchases made at supermarkets, drugstores and gas stations. You earn 1% rebates on other purchases. (we don’t qualify for the introductory 6%). No cash back, but maximium $1000 back in rewards points and rebates. You can save up to $5000 toward a car (5 years at $1000 each). You can also earn $0.01 per mile driven (with some restrictions)
- AT&T Universal Savings Platinum Card – We ruled this one out when we read that it was only rebates when you purchased AT&T products and services. We don’t use AT&T for anything.
- Citi Cash Returns Card – 1% cash back (we didn’t qualify for the new cardmembers limited time 5% offer). When you hit $50 “Citi Dollars”, Citi sends you a check for $50.
- Citi Professional Cash Card - You will earn 3% on purchases made at gas stations, restaurants, certain office supply merchants and on auto rentals (we don’t qualify for the intro offer again). 1% on everything else.
Again, please check out the Citicards website for the latest information. Things could be completely different by the time you read this article, so you should always confirm the latest information by reading the terms and conditions on credit cards you are interested in.
So, from that list, we can eliminate AT&T Universal (we don’t use any AT&T products or services), Citi Professional (too limited on where you get your 3% cash back, and not really applicable to us), and the Platinum Select (it’s only 2% in places where Driver’s Edge is 3%, and it’s limited to $300 back a year although it is cash).
That left us with the Cash Returns card, and the Options Platinum Driver’s Edge card. The cash returns card was only 1%, and in the end we decided that even though cash back is great, we think we could earn more with the higher percentage from the Driver’s Edge card than we could from the Cash Returns card. With the Driver’s Edge card, we can convert our rebates to rewards through the Citi ThankYou Network. The ThankYou network is Citi’s “shopping mall” where you can spend your points on gift cards, household items, or other items we might normally have to spend “real money” on. I checked it out, and I think by converting the rewards points into ThankYou points, we can get more out of the program because we can get up to $1000 worth of items. I see it as a way to get things we might not normally get, and not have to feel guilty about it. The main item we’ll be getting is restaurant gift cards. This way, we can treat ourselves to a nice meal out and not affect our budget.
In the end, what we chose might not make sense for everyone. For us, it seemed to be the best choice and fit our desires. Now I feel like I’m at least earning rewards that I will use more frequently than I would with the airline miles.
As an added note, if you decide to go with the Citibank Options Platinum Driver’s Edge, make sure you get that card specifically. If you get a Charter Driver’s Edge, you won’t get the full benefit, and can’t convert your points to ThankYou network points.
Image from Wikimedia Commons
When I started my first job after college, I didn’t own much. I had my car, some hand-me-down furniture, some clothes, a TV and VCR, a computer, some books, and a variety of other small things. I didn’t have much in the way of assets, and the furniture I had was really starting to show it’s age.
I managed to get a good job and it payed well. Considering I had so little when I moved, and I thought I was doing well, I decided to “move on up”. I upgraded my TV from a 13″ to a 27″. I bought new furniture, including new couches, coffee table, entertainment center, and end tables. I bought some movies, new books, and a smattering of other things. Before I knew it, I had $12,000 in credit card bills. By some people’s standards, that might not seem like a lot. For me at the time, it was huge. My father had always told me to avoid debt, and never carry a balance on your credit card. He’s never had to pay a finance charge on his credit card before. I hadn’t either up until this point.
I knew I had to find a way to pay the debt down. So I took out a debt consolidation loan against my car. Everything worked out fine, and I managed to get out of debt at that point fairly painlessly. I didn’t learn the lesson completely (I’ve had debt since this incident), but in my case the debt consolidation loan actually worked out pretty well, and saved me some money in the end.
Now, I’ve got a friend who has never handled his money well. He’s made some bad decisions in his life when it comes to finances. He’s actually a very, very smart guy, but he just doesn’t always think when it comes to spending money. I guess I’ve been there too, so I don’t judge him, but he did make a decision that confused me recently.
Things had been going well for him for a bit, and he just got a debt consolidation loan. This loan lowers his overall payment requirements each month, has a lower interest rate, and helps him get all his debt into one place. It looked like a pretty good plan to help him get out of debt.
But then, shortly after he had everything setup, he went out and made some purchases on his newly paid-off credit cards. After going through all the trouble to consolidate his loans he started filling up his credit cards again and created even more debt. He purchased some things that he wanted, but couldn’t afford until he had more room on his credit cards. The things he bought were far from necessities.
Now he has to worry about paying off both the loan and the new credit card balances. It seems that he’ll be in debt for a while longer. He understands what he’s done, and that it’s not the best financial move, but it doesn’t seem to change his behavior. Instead of working to pay down that loan, he just compounded it by adding even more debt.
Normally I wouldn’t advocate cutting up your credit cards. We use our credit cards extensively, but we ensure that each month we don’t carry a balance so we avoid paying finance charges. If you use your credit cards responsibly they can be a very convenient and useful tool. If you have rewards, you can even get some cash back or some other type of reward for using them. In this case, I think my friend is too tempted by available credit and might be better off just cutting up his cards.
If you get a debt consolidation loan, make sure you keep these things in mind :
- Make sure that the deal you are getting is actually giving you a lower interest rate than what you are paying now. And make sure that there aren’t any unnecessary fees.
- Setup a budget that allows you to always make the loan payment and stick to it. This will help ensure you aren’t living outside your means and that you are paying off the loan.
- Stop using your credit cards until the loan is paid off. Maybe stop using them entirely if you don’t think you can handle the temptation.
- Pay off the loan early if possible. I paid my loan off about 6 months early to get out of some of the interest. It’s definitely a good goal to have.
Debt consolidation loans can work for you, but only if you work within some basic guidelines and exercise your self-control when it comes to your credit cards. According to Bankrate.com, 70% of people who get debt consolidation loans have the same, or higher, debt loads 2 years after they get the loans. If you think a debt consolidation loan would work for you, do some research before you commit to anything. Get some help from a financial advisor if you can. Don’t wind up in the 70% that don’t reduce their debt at all.
Image Source: SqueakyMarmot