Hello and Intro

Xstatic3333 · October 2013

Hi all, I've been lurking for a bit since moving on from TK and wanted to introduce myself and say hi! Reading the discussions here gave me a great start towards coming up with a good debt and savings plan for H and myself now that we've combined incomes.

I just finished up grad school and was lucky to get a good job in my field right away. Around the same time H started a better job, and we want to make sure we use our increased income wisely. The big decision we've made is to pay off all of our credit cards from our e-fund once our health insurance kicks in next week. We're not going to do a strict snowball after that; half will go to paying off H's car, and the other half to building our savings back up (we're both in environmental science, which is an unreliable field). I'm really excited to see that debt go away! We'll be taking the slow and steady approach to our student loans, but we're comfortable with that. I'm more stressed if I'm not building savings and retirement.

Enough about me, I look forward to chatting and getting some great budget tips from you all!

hoffse · October 2013

Welcome - this is a friendly and relatively tame board. Lots of open talk about money, finances, deals, budgets, etc. Feel free to ask any questions you may have, and you are likely to get a variety of different responses. We don't all agree with one another!

Good to hear you are getting rid of credit card debt. That's really the first step to financial security. Eventually you will be able to use credit cards solely to benefit you (points!) as opposed to your being at the mercy of their ridiculous interest rates. I find that there are very few things more satisfying than when my credit card company has to deposit cash into my Roth IRA because I'm playing their game and winning.

mkerr09 · October 2013

Welcome!

HoneyBee973 · October 2013

Welcome!

Apollo11235 · October 2013

Welcome and congrats to you and your husband on your new jobs!

Xstatic3333 · October 2013

Thanks everyone! It's a scary decision to knock our generous 6-7 month e-fund down to more of a 3-4 month fund, but the math doesn't lie, it just makes sense.

@hoffse I agree, I would love to work a credit card for points. Neither H or I has added any credit card debt in about three years, so we could handle it responsibility-wise. The only issue is that since I already have three active cards with so-so benefits but pretty high limits that I got in my early 20s, I'm hesitant to open any more. Even though my debt got big, I have always paid more than the minimum on time so I have good histories on all of them as well. We'll probably have H open a good points card in a few months; his credit score is rapidly on the rise as some bad decisions from about 7 years ago get purged from his reports, so the longer we wait the better card he'll be able to get.

hoffse · October 2013

Honestly I think the decision to go from 6-7 months of an e-fund down to a 3-4 month e-fund makes sense in your situation. You said that your field has a lot of turnover so you will want to build that e-fund back up, but the interest rates on credit cards are just ridiculous - and it seems unlikely that you're going to need to change jobs immediately after you start a new one. Depleting it a bit now will give you some time to get that e-fund back to a healthy level for your lifestyle.

To be honest, I approach an e-fund differently than a lot of people on these boards. I am a lawyer and H is about to graduate from law school and also be a lawyer, so keeping 6 months cash on hand for us is just overkill. We keep about $10K in cash for things like auto repairs and medical deductibles, and then we keep the rest in the market. Not the most secure place for an e-fund, of course, but it makes sense for our situation because it gives us some growth. The legal market is hard to get into, but once you are in employers are hesitant to force you out without helping to arrange a new job for you (firms have to be cautious about getting sued). Or at least, that's how it works in my market, which is a mid-sized city. So unless you're just a total disaster and really shouldn't be licensed anyway, we don't have to worry about turnover as much as people in other fields. Hence our willingness to be a bit more risky with anything that exceeds our $10K e-fund.

Everybody's situation is different, and I think an objective assessment of your specific situation plus an analysis of how you approach risk is very important when making these kinds of decisions.

Re: credit cards - I understand that for sure. H and I have a lot of credit cards between us, most of which have a designated purpose (foreign travel, work reimbursement, etc). So those often have no balance on them. I also shop frequently at a few stores that made it worthwhile to have those cards - pottery barn, amazon.com, target, kohl's - but I often have no balance on those either. I've kept open some of my older cards that I no longer use just for the same reason you described... though I think after we purchase our first house I'm probably going to go ahead and close them and just not worry about it.

My all-time favorite card is my Fidelity American Express. That thing gives me 2% back on every purchase I make, and the rewards get deposited into our Roth accounts automatically as cash. We can then invest that cash like any other contribution. You can also get cards that deposit rewards into regular cash/checking accounts at Fidelity or even College 529 accounts - again, all at 2% back. I think we will open one of those 529 cards if/when we ever have children.... I feel like having credit card rewards help pay for college might be one of the greatest ideas ever, especially since you have less time to save for it (compared to retirement). So contributions have to be a bit more aggressive from the start to really get serious growth before high school graduation.

vlagrl29 · October 2013

hoffse said:

Honestly I think the decision to go from 6-7 months of an e-fund down to a 3-4 month e-fund makes sense in your situation. You said that your field has a lot of turnover so you will want to build that e-fund back up, but the interest rates on credit cards are just ridiculous - and it seems unlikely that you're going to need to change jobs immediately after you start a new one. Depleting it a bit now will give you some time to get that e-fund back to a healthy level for your lifestyle.

To be honest, I approach an e-fund differently than a lot of people on these boards. I am a lawyer and H is about to graduate from law school and also be a lawyer, so keeping 6 months cash on hand for us is just overkill. We keep about $10K in cash for things like auto repairs and medical deductibles, and then we keep the rest in the market. Not the most secure place for an e-fund, of course, but it makes sense for our situation because it gives us some growth. The legal market is hard to get into, but once you are in employers are hesitant to force you out without helping to arrange a new job for you (firms have to be cautious about getting sued). Or at least, that's how it works in my market, which is a mid-sized city. So unless you're just a total disaster and really shouldn't be licensed anyway, we don't have to worry about turnover as much as people in other fields. Hence our willingness to be a bit more risky with anything that exceeds our $10K e-fund.

Everybody's situation is different, and I think an objective assessment of your specific situation plus an analysis of how you approach risk is very important when making these kinds of decisions.

Re: credit cards - I understand that for sure. H and I have a lot of credit cards between us, most of which have a designated purpose (foreign travel, work reimbursement, etc). So those often have no balance on them. I also shop frequently at a few stores that made it worthwhile to have those cards - pottery barn, amazon.com, target, kohl's - but I often have no balance on those either. I've kept open some of my older cards that I no longer use just for the same reason you described... though I think after we purchase our first house I'm probably going to go ahead and close them and just not worry about it.

My all-time favorite card is my Fidelity American Express. That thing gives me 2% back on every purchase I make, and the rewards get deposited into our Roth accounts automatically as cash. We can then invest that cash like any other contribution. You can also get cards that deposit rewards into regular cash/checking accounts at Fidelity or even College 529 accounts - again, all at 2% back. I think we will open one of those 529 cards if/when we ever have children.... I feel like having credit card rewards help pay for college might be one of the greatest ideas ever, especially since you have less time to save for it (compared to retirement). So contributions have to be a bit more aggressive from the start to really get serious growth before high school graduation.

That is so awesome! I need to look into something like this. Right now I just have a Commerce Bank Visa CC. I get rewards but not the kind you get. We could do this for our DD

hoffse · October 2013

It really is fabulous. I mean, this month H had to pay for his bar exam course, so we put that on the card. We had budgeted for it, so it's paid off already. We will get about an $80 deposit at the beginning of November from just that one thing, not to mention our daily spending. So I feel like it softens the blow when large expenses crop up.

The 529 card seems like the greatest deal of all though - I took a look at what my alma mater costs this morning: an estimated $62,000 this year. H's alma mater is an estimated $60,000 this year. This is for undergraduate, by the way, not professional school.... I nearly passed out. We both attended our schools on partial scholarships - and we received a great education and a huge leg up in life from those institutions - but still. It's ridiculous. I figure we're going to need all the help we can get with that, so if Fidelity will let us dump credit card rewards into a 529 account for 18 years, I'm not going to say no.

hoffse · October 2013

In case you're interested:

https://www.fidelity.com/cash-management/american-express-cards

You do have to have a Fidelity account to open the card. H and I both like Fidelity a lot and use them for everything. I'm sure the other investment companies are also great, but we just have no experience with them. Fidelity makes us happy enough that we've never been inclined to shop around.

And yes, I know it's probably anti-MM to be championing a particular credit card on these boards with all the folks trying to get out of debt. But for those of us who use credit cards to our advantage, I think it's something worth sharing.

Xstatic3333 · October 2013

Yikes, that is awesome. It might be worth the credit hit to apply, especially since I already have my Roth IRA with Fidelity. Gah financial choices!

vlagrl29 · October 2013

hoffse said:

In case you're interested:

https://www.fidelity.com/cash-management/american-express-cards

You do have to have a Fidelity account to open the card. H and I both like Fidelity a lot and use them for everything. I'm sure the other investment companies are also great, but we just have no experience with them. Fidelity makes us happy enough that we've never been inclined to shop around.

And yes, I know it's probably anti-MM to be championing a particular credit card on these boards with all the folks trying to get out of debt. But for those of us who use credit cards to our advantage, I think it's something worth sharing.

I do have 2 IRA's with Fidelity

I've learned so much from your posts! Yikes on the costs of the alma maters. 6 years of music school at a conservatory cost me $45,000. the prices today freak me out! I graduated almost 10 years ago.

Mom987 · October 2013

Welcome! Glad you have a good plan!

CuriousKiddosMama · October 2013

Welcome!!! It's always nice to have new people on this board. Like another poster said, we don't always agree, but that's generally a good thing as you often get to hear lots of different opinions on whatever is going on for you.

2% cash back is incredible! We have a Discover card, which will do 5% on one category at a time, but I think it's like .5% or 1% on everything else.... may have to look into that card.

hoffse · October 2013

Yeah I looked into the quarterly cards and just decided I wasn't likely to keep up with it. I mean, things like gas and groceries you need year-round, so that would frustrate me to get rewards only once a year on those categories. I like the 2% flat rate that I just don't have to keep track of.

Every once in awhile I get enticed by another card that is advertising itself as a better deal... example: I recently ran into one that advertised 6% back at grocery stores. Well that seemed like a great deal. Then I read the fine print and realized that "big box" stores like Walmart, Target, and Costco were excluded from the definition of "grocery store." That card no longer became relevant for me. I only shop at designated grocery stores (like whole foods) once or twice a month, and those purchases are always pretty small. So I just haven't found one that has as good a return overall as the fidelity card.

I do keep store cards for specific shopping at stores I go to regularly- Amazon.com is 3% back, Target is 5% off your purchase, and pottery barn is 10% back (I've had 5-10 weddings per year recently). But for anything that's not store-specific, I always end up using the fidelity card.

OP, sorry for highjacking your post

Once again, welcome.

Xstatic3333 · October 2013

No worries! I learn a lot when things get off topic like this

Ducktale · October 2013

Continuing with this credit card side track, we also have a Sears store credit card. When we bought our house we had to buy tons of things plus appliances and we saved so much money, I don't know exactly but I'm sure it's been over $1000. They do things like, offer certain percentages off + free delivery + rewards dollars, and when you're buying expensive things like appliances, it all adds up quickly. My 5% off at Target is great, but doesn't add up nearly as quickly as the Sears card. Plus I think their customer service is outstanding. We only buy appliances there. So there's my plug for that card.

(Disclaimer: hopefully any lurkers know that many of us only support using credit cards if you pay it off every month and never carry a balance! And that having too many credit cards open, including store cards, can hurt your credit score, so think before you open and choose wisely.)

Ducktale · October 2013

@hoffse Do they only have AmEx for the 529 cards? I've never had an AmEx card, but it seems it's not as widely accepted, so I've always avoided them.

hoffse · October 2013

First off, ditto Ducktale's disclaimer - points only work if you actually pay your card off in full!

Ducktale, they have a visa option which is 1.5% for the first $15,000/year and then 2% after that - I believe AmEx is the only option for the 2% flat rate starting with your first dollar spent.

I actually carry both cards - I use AmEx wherever accepted (which I find is most places I shop) and then the Visa if they won't take the AmEx. 1.5% is still better than most rewards cards.

But I'm also a little embarrassed to admit how many credit cards I have - I suspect the MM gods would not approve, even though I use fewer than half of them most months.

If you shop at a lot of specialty stores or small businesses (including small restaurants), then you may not use the AmEx all that often. But I find that about 90% of my purchases can go on the AmEx. Maybe more than that since I'm a huge Costco shopper, and they only take AmEx.

FYI the reason many small businesses don't accept AmEx is because the AmEx charge to businesses is about 5%, which is a LOT higher than the other credit cards. A lot of small businesses just can't afford it while also paying fees to Visa, Mastercard, etc. For consumers, however, that 5% generally translates to higher rewards back and sometimes lower interest rates. They also have better customer service I have found. For instance, you can often get things like free insurance on rental cars when pay for your car rental with your AmEx. The perks vary by card, of course, but my AmEx cards tend to have more perks than the others.

AmEx also hosts something called "Small Business Saturday." This is a program where you enroll your card with AmEx, and then you shop at a small business on their designated list the day after Black Friday. Eventually, they will reimburse you for a $25 purchase made at that small business. My local mall's gift card center is always on that list for some reason, so I buy $25 gift cards to the mall each Small Business Saturday. Eventually AmEx reimburses me, and then I can use the mall gift cards at Macy's or wherever for Christmas shopping. Probably not what AmEx intended, but hey - I'm still following their rules! Sometimes it takes a couple months for the reimbursement to come through, but it's always worked for me. So that's another perk. You do have to make the purchase on that actual day, though. One year my dad and I forgot about it until about 10 pm that night - so we went to a liquor store that was on the list and purchased about $150 worth of liquor between us that we were eventually reimbursed for. That was a good year. I don't think the enrollment period is open yet (they are still signing up businesses for 2013), but here's the link:

https://www.americanexpress.com/us/small-business/Shop-Small/

That said, AmEx is definitely not for everyone. As much as I would like to be a super "buy local" type person, I'm ultimately too cheap, which is why I tend to shop at stores where AmEx is accepted. If you still think the AmEx won't work, here's the link to the Visa:

https://www.fidelity.com/cash-management/visa-signature-card

hiketheworld · November 2013

I've never carried a balance on my credit cards- I treat them like debit cards and pay them off right away. I think some of the cards you've all mentioned sound really great! 2% flat cash back is definitely really good. I have a Cash + Visa through US Bank that has really worked great for me. You get 5% cash back on one category, 2% cash back on two categories, and 1% cash on everything else. You can redeem as a cash credit to an account or get a Visa gift card. They used to give you an extra $25 gift card for every time you redeemed $100 or more at a time, which was amazing, but they aren't doing that anymore- maybe you can do it once a year. You have to pick your categories every quarter, but they send an email reminder and you can pick them same categories every month if you want to. I do 5% at restaurants and 2% on groceries each quarter, then choose my last category based on upcoming expenses. We charged about half of our wedding and most of our honeymoon to the card and probably made over $1000 on it this year alone. The card is free butI have no idea what the interest is because I never pay any. I love this card so much, so I figured I would share!

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