Rewarding Reseach

Credit card art image from here

For most of our expenses, my husband and I both use an airlines reward credit card. Now, there was a time when we could barely make the minimum payments on our credit cards. So it's a little hard to believe that we now use a credit card every month for our expenses. The difference is, we now pay it off in full each month! We totally learned our lesson the hard way, but we've found that we're now very disciplined about paying it off, because we never want to end up back where we were before.

There are two main benefits for us by handling our expenses this way:
(1) We can keep track of everything we're spending in one place rather than having to consult a bunch of receipts in order to enter our expenses into our budget tracker.
(2) We're awarded one mile for every dollar spent.

In the past, this worked great for us and we've used these rewards to go on several trips. But since we've had a baby, our plane trips have definitely decreased. I've been thinking about switching our main credit card to a cash back card, since we may see more benefit from that now than from getting miles.

In my research I came across this site, which lets you compare credit card rewards programs based on your own needs. I'm having trouble deciding whether to go with a cash back card, or with this card, which will deposit the rewards directly into a 529 plan for our daughter. For now, I'm still researching, but I'll check back when I decide.

2011 Goals...even though the year is almost over!

Image from here

I've posted before about our monthly goals, but we also have long term goals we like to set each year. I keep these goals written on the bottom of my budget spreadsheet, so I'm constantly reminded of them.

These are our goals for 2011. Some have already been completed. And some may not be completed by the end of the year, but we're shooting for it!
1. Eliminate furniture store card. Complete. We bought a mattress two years ago with a 0% interest store card. But I got sick of having that debt on our spreadsheets, so we went ahead and paid it off ahead of schedule.
2. 10K in savings by the end of July. Complete. Since we had concentrated on eliminating debt, and then went to just one income, it left us with savings that were a little low. We're on the way to building that back up, and we completed this earlier this year.
3. Build Emergency Fund to 8 months. In progress. We're slowly making our way towards this one. We've set a goal to complete this by the end of next year.
4. Start a Roth IRA. Complete. See this post.
5. Come up with money for a new computer. In progress. We've had our computer for 6 years, and are trying to save enough to buy a new one before this one goes kaput. So any extra cash we get our hands on (like gifts or side income) goes in a drawer to go toward the new compute. We're about 3/4 of the way there.
6. Complete a Legacy Drawer. In progress. If you're wondering what a Legacy Drawer is, here's the explanation. I actually just added this to the list of goals recently, but I am wanting to finish before the end of the year.

So, there they are!

Finance Fridays: Keeping Track

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Before we got debt free, we had no idea where our money was going each month. We ate out a lot, went shopping a lot, went on lots of trips. So after we got debt free, when I knew we were going from two incomes to one, it was clear that we had to start tracking our spending and stick to a budget, or we were going to end up right where we started, which was not an option.

There are all kinds of ways to track your spending. Some people write everything they spend down in a notebook, some use Quicken or other online programs to keep track. Our way is kind of a hybrid of those two things.

We keep our budget in an Excel spreadsheet. We spend money from two places. As many purchases as we can go on our credit card that gets airline miles. (We've gone on vacation several times with those miles too, and it's all for purchases we would have made anyway. Always make your money work for you!) We pay that card off in full every month (of course). Places or bills that won't take a credit card, like our mortgage, are paid directly from our checking account. So at the end of each week, I copy the purchases from our online credit card statement, as well as our checking account, and go through each one and input it into my Excel spreadsheet. The only cash we really spend is from our blow money category, and I don't track cash purchases from receipts, I just deduct the total amount.

Some people might think this is a clunky way to go about it, but it's what works for us - I am going through every purchase, which helps me to really see where our money is going.

We've been doing this for two years. I can see how it wouldn't for some people. But however you do it, if you're interested in either becoming or remaining debt free, tracking your spending is one of the most important things you can do. 

Eyes on the Prize

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I’ve lost around $8,000 since last week because of this.

It’s enough to make me want to take all of our retirement money out of stocks and move it to cash. But I know that would be the absolute worst thing I could do right now. I just have to keep telling myself:

Stay calm and don’t panic. As a somewhat educated investor, I already have a portfolio with a mix of stocks and bonds that cushions my losses during tumultuous times like right now. If I was all in cash, I would have missed out on all the tremendous gains the market made the last year too. And it might be my instinct to lower our 401K contribution for a while, but right now is the time to BUY! Things are on sale right now, and there are good deals to be had! (It’s the stock equivalent of the NM Last Call sale!)

Keep your eye on the prize. What’s important is where we finish, not where we are right now. Because we’re still relatively young and retirement isn’t on the horizon for a long while, the finish line is pretty far off. We’ll have ups and downs along the way. But as we move closer to retirement, we just have to make sure we adjust our portfolio accordingly to create an even safer “cushion”.

So yes, I’m bummed that when I update my net worth calculations for the month the numbers will be down. But ultimately, this blip could allow us to come out even further ahead in the future.