Debit Cards, Rewards, and Security

No Credit Needed pointed me towards visaextras.com, a free points/rewards system for users of debit cards. There are a lot of people who are so blinded by the prospect of rebates and rewards that they wouldn’t dream of using anything but plastic. While I would disagree with them, at least using a debit card links your spending to your income in a very direct way.

MSN Money has a related article on rewards and security for debit cards. The most important thing to understand here is that DEBIT CARDS HAVE THE EXACT SAME FRAUD AND LOSS PROTECTION AS CREDIT CARDS. Check

A Great Trend — Colleges Refusing Student Loans

I feel one of the real short-sighted decisions that we have made as a society is the decision to saddle students with debt (often a great deal of it) in order to complete their graduation. Now, I know that if you approach education with your eyes open it is entirely possible to make it happen without debt. However, it still is the case that when a student is evaluated for financial aid, it is assumed that they can and will go into debt in order to get an education.

It gave me great hope to read that Davidson College (alma matter of one of my nieces) has decided to go a different direction. MSNBC is reporting that Davidson has decided to replace student loans with grants and work-study programs. This is especially heartening, as this is a small, private, liberal arts school, where prices are often highest. The ability to graduate without debt makes this a great college value in my book!

Buying Used

I was browsing through MSN Money and found a great article titled “10 Things You Should Never Buy New“. There is some great practical advice here, definitely worth a read. Our culture is so focused on consumption and the marketing messages are so strong that it seems positively radical to settle for something other than the latest and greatest new thing. Buying used can be a fantastic way to stretch your resources and truly have your cake and eat it too.

An example … this weekend I took my 3 and 6 year olds shopping and we got bought a soccer ball, a toy helicopter, a model, a board game, and some action figures. Plus, we stopped at the restaurant of their choice and got lunch. Sound expensive? It certainly could have been! However, on Saturday our church had a very large garage sale, and everything they bought was used. The grand total of their purchases was $5, and the soccer ball only cost a nickel. Lunch consisted of a hot dog, chips, and a soda from the card table out front, which cost $2 each, for a total of $9. Now, this was money that they earned (through commissions, not allowance) and they were thrilled with their purchases. Doing this at a toy store and a chain restaurant could have easily cost us a hundred dollars or more.

At the same time, this week the entire family is going to go to see The Lion King on the stage, a big deal for us. The tickets are very expensive, several hundred dollars for all of us. Normally we could not have afforded both a shopping spree and a night on the town. However, we were able to do both by buying used.

Give it a try!

Is it a Want or a Need?

As our family started down the path to financial peace, one of the most useful tools that we had was to classify the things in our life as a want or a need . If everyone could agree it was a need, then we made room for it in the budget, regardless of what we needed to do to get there. Otherwise, it was a want, we prioritized it and tried to fit it in as best we can, but only if it made sense.

If your monthly income covers all of your needs then you are doing well. Otherwise, you are going to have to make some decisions about increasing income or temporarily going without.

You would be surprised how often we disagreed about what was a want and what was a need, and how just considering our lives in this way changed the way we approached money. It is pretty easy to decieve yourself on exactly what is a luxury and what isn’t. Here is a simple test that we came up with …

The Want Test

Think about one of your ‘need’. Imagine your life without it for 90 days, or with a substitute that is significantly less expensive.

  • Would I be considerably less safe or comfortable without it?
  • Would it signifcantly disrupt daily life for me or my family if I didn’t have it?
  • Would it cost me a lot cash up front to get rid of it?
  • Would it violate the spirit or the letter of the law if I lost it?
  • If I was counseling to someone else in my situation, would I recommend that they keep it?

If you can honestly answer ‘no’ to all of these questions then it is most likely a want in need’s clothing. Unless you have completed the baby steps then I would recommend that you reduce or eliminate this cost as soon as possible.

Also, I would take some time to consider if over the long term if this expense is more important then retirement, college savings, or investments. If your first answer wasn’t an immediate, unqualitied, unflinching ‘yes’, then you should really reprioritize this item in your life. I promise you, it will be worth it!

Luxury or Necessity?

Pew Research has published some survey results on attitudes around what the average American considers a luxury and what is a neccesity. The list of things that the average person “can’t live without” has multiplied in the last decade, incorporating items that are new (such as technology and computer-related items) and previously available (microwave ovens, air conditioning, clothes dryers) alike.

While this isn’t particularly surprising, the survey tells a lot about American life in 2007. The thing that grabbed me was this statement:

… one pattern was consistent: wherever there has been a significant change in the past decade in the public’s judgment about these items, it’s always been in the direction of necessity. And on those items for which there are longer term survey trends dating back to 1973, this march toward necessity has tended to accelerate in the past ten years.

I think this tells us a lot about the American mindset and the power of marketing in our culture. We don’t just want it, we want it now, regardless of the consequences. It doesn’t really matter if we need it, or if we can afford it, only if we can get it really quickly.

Week 4 Homework

This lesson is titled ‘Buying Only Big, Big Bargains’. This is critical information on how to use your money wisely to ensure that you have enough to do the things that you want (and need) to do.

The homework for week 4 is:

  1. Read Chapter 13 in Financial Peace Revisited (it came in the kit with your materials, no need to purchase again).
  2. Keep working with your the zero-based budgets. Stay flexible and keep making adjustments, it will get better each week.

Lastly, we have some additional reading on this subject, if you are interested.

Thriving on $12K/year

MSN Money provides some inspiration from a true story on surviving and thriving on $12,000 per year. Donna Freedman decided to go back to school to better herself and her future, and in doing so she had to make some radical lifestyle changes. She is now a full-time student with a grant that covers her tuition and books.

In order to make ends meet, Donna:

  • Works doing baby-sitting, mystery shopping, freelance writing, paid medical research, and as the manager of her apartment complex.
  • Takes a brown bag lunch every day.
  • Gives money to those less fortunate than herself.
  • Donates regularly to her church.

I found it totally inspiring to see someone who is making their future better and thriving in a difficult situation. She has totally taken responsibility for herself and is making it happen. Donna is going to sacrifice to graduate from school completely debt free, and be able to live like no one else. It isn’t going to be easy, but it isn’t going to be forever either.

The next time you are struggling with making a financial sacrifice, measure yourself against what the Donna Freedmans of the world are doing.