Paying with Credit is Like Eating the Whole Pizza

It seems that most of us know that we will spend less with cash. A recent MIT study found that subjects that were asked to bid on a basketball game, bid TWICE as high when they used credit cards, versus when they used cash. Not surprising. An easy to believe cash and credit card experiment. One way to look at it is that when you are using your credit card, you aren’t really aware of how much debt you have, so you figure, “Why not spend more?”. It’s like when you are dieting and you eat one piece of pizza. You then think, “Well I already messed up my diet today, I might as well have another piece of pizza and another piece of pizza.” Next thing you know, you ate the whole pizza pie! Ok maybe not the whole pie, but you definitely ate more pieces than you should have.

The point is that if you want to become more conscious of your spending and money, using cash is really one of the best ways. You really don’t want to eat the whole pizza pie do you?

Money Surprises: Good or Bad?

I had a huge revelation the other day regarding finances. We don’t always end up with the result we go after. The money success we end up achieving is not what we planned but is still a direct result of the action steps we take to towards controlling our money matters. I saw this recently with my SIMPLY MONEY class when women were sharing goals they had achieved that they NEVER thought they needed or thought they could handle. During the process of looking at their money EVERY WEEK, they unearthed a few very important goals.

Why Does It Happen?

Money has been compared to everything from Freddy Kruger to Six Flags Amusement Park. Do you see a theme here? FEAR!!!! Once you realize that you ARE smart and capable enough to master your own money independently – much of the fear fades away. Next thing you know, you aren’t scared to open your 401k statement or open the automatic savings account or even discuss expense ratios on your mutual fund.

Where there’s a WILL, there’s a way.

When I bring up the topic of wills, most people’s eyes glaze over. If they don’t have children, they assume that they don’t need one. Or they think they are going to live forever and not need one! Wrong on all counts. This was a big eye-opener for some women going through their financial check-up. Once they tackled their immediate needs, such as finding out their credit score, they were open to dealing with other areas of their money life such as drafting a will.

Everyone needs a will, regardless of their situation. The complexity of the will clearly changes based on your situation. If you have ANY savings, you want to be clear about who gets the savings when you are gone. What I have found is that once people learned a little more about wills, they realized they needed one and were motivated to get one – this was especially true of business owners and home owners. If you have children, you obviously need it. When you are drafting your will, don’t forget the living will and health care proxy. If your situation is fairly simple, you can buy a will kit at Staples or nolo.com. Just be sure to get it notarized with witnesses.

“I Discovered Mutual Funds”

Wouldn’t you like to be the person saying this? Again, some women signed up for SIMPLY MONEY just to feel better about their cash flow or get support around opening their 401k statement. Along the way, they learned about mutual funds, how to analyze them on Morningstar and how to figure out which ones they needed for their asset allocation. Believe it or not, they found they actually liked learning about mutual funds and were empowered by that knowledge. One woman even brought up no-load fees on a date and was impressed with how much she knew! They ended the class stating they “discovered mutual funds” and wanted to learn more.

The point of this is that by getting inserting money into your weekly life, you will unearth other money goals and see the effects ripple throughout. Try it. See how it fits. Who knows, you might like it?

Can I Use My Business Credit Card?

This is a great question I received from SINGLE EDITION.

Question:

I am dating a man who is always charging our meals onto his business credit card. I am wondering if this is legal and also if I should be offended by it?

Answer:

That is very money savvy of you to question the legality of using a business card for personal expenses. He could be using the card based on advice of his accountant or even paying the card off with personal funds. It is hard to say. However, you bring up the point of having open money conversations especially if you are getting serious with this fella. There is nothing wrong with asking him why he is using the business card. I wouldn't bring up the legal issue as it might make him defensive. Instead show him you are interested in his work and understanding the financial part. If he dismisses the question, it might be a warning sign about other areas of the relationship.

Budget Beauty Habit

If you color or highlight your hair, you can stretch visits between hair appointments by sticking to a color that is closer to your own. You will still have that shiny salon-styled look but your wallet will be thanking you for going every few months instead of every 6 weeks.

What is your TOUGH DECISION?

One of my clients recently emailed a dilemma she is facing. I know that many of you might be going through this as well and thought it was worth sharing.

She has been a successful freelancer but is seeing a big dip in income. While she has been looking for more work, this is a tough job market (as I'm sure many of you know). We have worked together over the years to really trim her budget so she feels good in that arena. In addition, she has been saving $250 into her IRA each month, and $100/month into her emergency savings. She just found out her rent is going up and is considering dipping into her savings to find a lower rent home. Is this a smart decision?

Answer:

This is not an easy question and there may not be a right or wrong answer. I would start with making sure she is doing everything she can to spend smarter and networking for income on sites such as Urban Interns or Mediabistro. We can all do better and it's worth the few minute check-up.

After that I would lower her rent, even if it means dipping into savings to do so. By reducing what she has control over, she is minimizing her pressure for the longer term and overall. I would strongly recommend to still save - this is KEY! Therefore, it's worth it to dip into savings to move and reduce expenses.

Bargains at the Phone and Cable Company?

I highly doubt that Verizon, Time Warner or Comcast has a summer sale. However, there are ways to get better bargain rates from your phone or cable company. A few steps to squeeze more money from them:

- Start by just asking. If you get someone on the phone who is completely uncooperative, just hang up, dial again and speak with someone new. You can also ask for their supervisor. Don’t waste your energy trying to argue with someone who won’t help. You can also ask for the rep who deals with new sign-ups. Even though you aren’t new, tell them you are considering switching companies. They don’t want to lose you!

- Ask for a better rate than what you have or ask if they have any promotions going on. More times than not, they will be able to offer a better rate.

- Bundle your services and get a discount. The phone companies are offering cable and the cable companies are offering phone services. Use one company for both services and get paid for it!

Putting the Fun Back in Money

This article was posted on SmartyPig, a great resource for saving money and earning higher interest.

Ever notice how it seems like everyone else is going on an amazing vacation? Or just bought that new car? However, when you sit down at the end of the month and are trying to find those extra dollars for the vacation, you just can’t seem to stretch that dollar enough. Especially when you aren’t even sure your job is stable. One of the keys is putting the fun back in your money. How? Follow these easy steps.

Associate the Fun with the Not-So-Fun.

If you are like most of us, figuring out your mutual fund allocations is as much fun as going to the dentist. But what if you crossed learning about mutual funds with your favorite hobby such as yoga or watching NASCAR? It could be as easy as that. Start associating the two. Every time you plan to take a yoga class or watch a race on TV, you have to look up a mutual fund you own on Morningstar, or read a few pages of Money Magazine or even ask a smart friend about their mutual funds in their 401k BEFOREHAND. Put it in the schedule and then you have permission to om away!

Running to Ratios.

You are so wild about running, you would run every night after work or sign up for a 5k every weekend if you didn’t have other obligations. But what if you could start learning key financial terms such as expense ratio, exchange traded funds and asset allocation, while you are making your mileage every week? Take advantage of that time running by downloading some interesting and FUNNY podcasts from NPR or iTunes onto your iPod. Most are free. My favorites are: Planet Money and Marketplace.

Live a SEINFELD Episode.

One of my favorite SEINFELD episodes is the one where Jerry and the gang decided to live in an opposite world. All their actions were supposed to be opposite what they usually did. Why not tackle this idea with your money? If you are at a birthday party for one of your son’s friends and you usually talk about the baseball game, you can say instead “How do you evaluate how much life insurance you need?” Or if you pay for everything with credit cards, try just using cash for one week. If you gravitate to the op-ed page in the paper while sipping your morning joe, why not read the business section first that day. See what happens. Before you know it, you are quoting Geithner’s latest speech and you understand the effect unemployment rates have on your bank’s interest rate.

Reward Yourself.

This is one of my favorites. There is nothing like the big sweet piece of chocolate cake after dinner to get us to finish our veggies. The traditional ways of taking control of money aren’t really working any more. Create a reward for yourself when you reach a certain dollar savings goal. For every $1,000 you save, go out for dinner at your favorite restaurant. Yes, you are spending money, but you also have $1,000 saved in a hard-to-reach account you probably wouldn’t have saved.

Find a Buddy.

There is no question that you are going to stick to your spending plan better when there is someone to hold you accountable. It’s your choice if you pick the friend who will kick your butt or the friend in a similar situation. Regardless, you are more apt to see results when you have to answer to someone else. While you are at it, maybe this is the time to pick new friends? Go through your FACEBOOK page and look for friends with good money habits. You never know what kind of good habits will rub off on you.