No Debt Plan

No Debt Plan is a blog about living a debt-free life. If you're new here, you may want to subscribe to my RSS feed (e-mail subscription also available). Learn more about me, or read some other popular articles. Thanks for visiting!

It was quite the hectic week last week. I received 4,700 visitors from Reddit, then had hosting/technical issues with the blog the day after. Ah, well.

PFBloggers.com:

• Trees Full of Money makes an excellent point about how to max out your 401(k) plan. Unfortunately, my company doesn’t offer a great company match so I don’t have to worry about it. On top of that, our match is based off of total contributions for the year rather than individual contributions.
• Pinching Copper reminds us how to opt-out of pre-screened credit card offers. We’ve used this for quite a while.
• Master Your Card thinks credit cards on keyrings is a dumb idea. I completely agree.

Elsewhere:

• Get Rich Slowly talks about getting past financial mistakes.
• The Carnival of Personal Finance is up at Stock Trading to Go.
• The Carnival of Debt Reduction is up at Motherhood 101 A Plus.

After listening to the annoyingly catchy commercials and radio jingles, I began to wonder if it was a stand alone company. I won’t link to the website because it offers a ’service’ that you can get for free.

However, if you visit the About page, you quickly learn that this is not a stand alone company. The website is owned by a company that was setup by Experian. Experian is one of the credit bureaus.

When you think about it, it’s a genius play. The US government tells the credit bureaus they have to allow consumers access to one credit report per year. To offset the cost of this (and to make additional profit), Experian sets up a for-profit website that offers essentially the same service for a monthly charge. Sure, there may be three people in the United States that can honestly need to spend $15 per month to have consistent access to their reports. The average consumer, not so much.

On top of that, Experian’s commercials for the website, and obviously the name of the website, make it seem like a free service. That seems like a scam to me. It isn’t a free service. The first month is free, then those pesky monthly payments begin.

This also explains how a single website could run a bunch of expensive radio and TV commercials. I can’t attest to the profitability of that company within Experian, but I’m guessing there are a lot of people out there that are signed up and don’t even know it. So don’t use free credit report.com. Instead, use the actual free service from Annual Credit Report.com. You can also check out Master Your Card’s 5 steps to a DIY “Life Lock”.

I see it on the grocery carts and in store windows.
I see it advertised in magazines and mentioned on blogs.

But what is it? What is upromise.com? I decided to dig in a little bit and see what this mysterious program/company can do for me.

Here’s how it works, straight from UPromise:

• Participating companies reward members who make eligible purchases of their products.
• Upromise receives revenue from these companies to help with operations and serve members.
• By joining, you’ll take advantage of a network of companies committed to helping members save for college.
• Our mission is to help make higher education affordable for all families.

upromise.com is a way for you to start saving for college education expenses now with you every day purchases. First you sign up for the service, and ‘connect’ a credit card to your account. When you spend money on that card at participating vendors, you get a certain percentage back. The website says the reward can be anywhere from 1-25%. That percentage reward is put into your UPromise account.

You can covert that money in your account in two different ways. It can be deposited into a 529 education savings account, or you can receive a check if the amount if over $250. Use Google to figure out how to do that after you sign up.

Is there any reason to not sign up with upromise.com? Not that I can see. (If anyone knows of any issues, please comment). Again, I had no idea it was a free service. I assumed you had to pay a fee or something along those lines. Apparently that is untrue. So use your credit card (wisely), earn some cash back, and earn some rewards for future education expenses. Seems like a good deal to me.

Also as you can see from the graphic above, if you sign up and make a purchase online with one of the many corporate partners by April 30th, you’ll earn an extra $10.

Has anyone out there used upromise.com already? How much have you earned in rewards? I’m signing up right now and connecting my AMEX card. We’ll revisit the post in the future and see how many rewards I’ve earned.

You may have noticed No Debt Plan has been down since early Wednesday. I am working on getting this fixed. My apologies — please stick around!

Since it is working right now, I am guessing it is going to go down again for probably another 24 hours. Hopefully I will be surprised.

We use our credit cards for every purchase that we possibly can. As I’ve said in the past, credit cards are not evil.

We got several mailers today from American Express encouraging us to spend our money with them. One was showing off a new tool they have for Blue Cash users that lets you track how much money you have spent on the card. This is important for the Blue Cash because rewards are based off one of two tiers. The more you spend, the higher the cash back percentage. The new tool is called the Cash Back Tracker.

The Good

The Cash Back Tracker is actually a pretty nice tool. You can track how much you’ve spent and earned for the current year, as well as what you earned last year in rewards.

As you can see from the image, we’ve earned $279 in cash back thus far this year on $16,819 worth of spending. That comes out to 1.66% overall cash back. In comparison, we earned $432.15 year ending July 2007. That was a big year — we got married and charged everything associated with it and our honeymoon.

The Bad

Unfortunately, AMEX wants to encourage me to spend even more money with them in the hopes I will carry a balance they can charge interest on. To that end, they let you set a rewards goal for the year. I could let them know I want to earn $500 in cash back. To earn that, of course, I’ve got to spend, spend, spend. This may seem innocent enough because it could be used just to show me what I’ve got to spend to get to that goal. I just don’t think it is too innocent.

Conclusion

The important piece for us is we are earning a couple of hundred dollars each year for free. We pay off the balance every month, and in turn get rewarded for it. Some others, like Free Money Finance, are earning more than 2% from multiple cards. We’re content with what we are currently earning because it keeps it simple. We don’t juggle ten different cards to get the highest return. I love paying our utilities with the card to earn a return on money I would have spent regardless. Sounds like a win-win to me. The tracker is quite handy because I can see how much we are earning in an up to date format.

As always, be careful. Don’t go spending just to earn a small percentage back in rewards. Use your credit card like a debit card.

One of my posts, The Concept that Changed Our Financial Life, is experiencing a bit of reddit effect. Not 10,000 visits or anything like that (not on the front page yet), but over 1,300 2,200 4,100 visits thus far today. That’s 10x 22x 41x more than normal!

You can vote for the post on reddit. I would appreciate as many ups as possible.

For the reddit users, please feel free to stick around, comment, engage in discussion, etc. You can also subscribe via RSS or e-mail.

You can also find out what this blog is all about. A little bit more about me.

Long story short, I write to try and help people get and stay out of debt.

Again, thanks for stopping by!

I noticed that Visa (V) IPO came out earlier this month. I had been meaning to track this more closely, but let it slip by. When I heard that it was already trading around $60/share, I could feel my emotions change a bit. Anxiety kicked in — had I missed a great deal? Was it too late? What could I do to get ‘in’ on this deal?

We have a stock and mutual fund sitting in a taxable account with Firstrade. This was leftover money from our house down payments. I am waiting for the stock to recover some of its value, and for the mutual fund to go back up due to the market fluctuations recently. As I sat here at my computer pulling up information about Visa, I began pondering the use of this money. I could sell both, take the proceeds, and buy some Visa stock. It’s bound to go up, right? I mean, look at Mastercard!

Woah, tiger. Let’s slow down for just a second. That’s the thing about investing… your emotions get involved. Let’s take a look at Mastercard (MA).

It’s kind of hard to see on the above chart, but since Mastercard went public in 2006 the share price has gone through the roof. It looks like Mastercard came out at around $45 per share. The current price? $216.50 as of yesterday’s close. Wow. That’s $171.50 per share in growth, or 381% in about two years. Not half bad, even by Warren Buffett standards.

So Visa is going to do the same thing, right? Not necessarily. This is what your brain is telling you. It sees the positives of Mastercard as well as the similarities in the businesses. Skipping all other logical thinking, it encourages you to go ahead and invest… and soon! However, these are two completely separate firms. There is no guarantee Visa is going to earn you 381% returns within the next two years.

Don’t get me wrong, I think Visa is a great business. I wish I owned it. But trading in a broad mutual fund plus one stock to get only one stock is foolish. This isn’t play money we’re dealing with here. So for now, I sit on the sidelines. Sticking to our plan. Sticking to our 2008 goals. There will be other stocks in the future that I will invest in. That is a few years down the road, maybe even decades. The bottom line is to keep your emotions in check when investing.

That being said, if I had the abilities to invest in individual securities, I would invest in Visa. Have any of you out there bought some Visa stock?

PFBloggers.com:

• Trees Full of Money shows how to optimize your 401k.
• The Social Marginal wants you to not rely on social security in old age.
• Saving Savy asks “how much you should spend on a hobby?”
• Pinching Copper shows us his sample debt collection letter. He tweaked a template and it looks great.
• Our Fourpence Worth is opening up a store.

Elsewhere:

• Free Geekery gives us a list of 50 great, open source finance tools.
• Debt Beater thinks procrastination is paying debt on time. I recently discussed procrastination in Mistakes: Procrastination.
• Money Smart Life ponders if office pools for things like March Madness are worth it. I say yes, to a point. Our office pool is $5 and I spent at most an hour on my picks. My time is worth more than the reward after that point.
• The Carnival of Personal Finance is up at Million Dollar Journey.

No Debt Plan:

• Thanks for stopping by today. You make this site what it is. I’m always on the look out for high quality readers like you, so why don’t you tell a friend or two?
• You can subscribe to this site in two ways now:
  • via RSS
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Let me know if you have any questions. My passion is helping you with your finance problems. Again, thanks for stopping by.

Read some other financial mistakes.

Perhaps you are not a procrastinator like myself. You’ve got your list organized, and you are ready for life to change. You’ve got a budget, you’ve planned ahead, and you are now anxious to see results.

“Why aren’t we out of debt yet?”

“Why can’t we retire yet?”

“Why isn’t anything getting easier for us?”

Perhaps you are being a bit impatient? This is the opposite end of the spectrum from procrastination. You simply can’t wait for something to happen. You’re anxious about progress on your goals. That can be healthy if kept in check. Not kept in check, it can impede your ability to move forward. It may even encourage you to question your past actions. That can end up with you undoing any positive progress thus far.

For example, we recently funded a Roth IRA for the 2007 tax year. We put $4,000 in with Vanguard. 2008 has been a crazy year for the stock market, as I’m sure you’ve noticed. Some time last week I checked the balance on our IRA and it was down 2.5% — within a month of opening the account! That was not a complete shock to me, but it still hurt to look at. If I were impatient and hoping for better results, I might do something rash like move the investments to something currently hot (like commodities) or even pull the money out of the account. Either of those are poor choices, as noted by the account recovering all but a small portion of its value at the end of last week.

A 2.5% loss within a month isn’t great, but as far as I know it was better than the market had accomplished that far. A loss of that little is virtually meaningless over the next 40 years. Imagine I had closed the account, or never put additional money in. The long term loss caused by that poor decision would be massive — more than 2 million dollars by my calculations.

So to answer the above questions, why aren’t you out of debt or able to retire just yet? Perhaps you just got started, or recently had a setback. Give it some time, and continue to make smart moves. Doing something is better than doing nothing. Just don’t expect results today. Take your debt reduction and wealth building steps one at a time.

This may not be finance related, but what the heck.

My office likes to do an office pool for various college sports. Last fall we did a Yahoo Pick ‘Em game all football season for $20. It was a lot of fun and lasted all season so the cost for entertainment all year long was fairly low. So of course with this being March, we’re doing a March Madness pool for $5.

Let me say that if you are in debt, you shouldn’t be wasting any money on anything ‘extra’. $5 towards debt is better than $5 down the drain. Thankfully, we are debt free other than our house and have a lot of extra cash flow at the end of every month. I can afford to choose to put $5 into an office bet.

This has been a really great tournament so far with several close games. Tennessee plays tomorrow so we’ll be anxious to see the result. For the record, I’m just happy they are in the tournament.

And that $5? It came out of my personal spendable money so it doesn’t affect our finances or my wife’s personal money. If I win, I’ll end up with $60 or so. Not a bad return on investment!