No Debt Plan

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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’ve decided you want to budget, but have no idea where to get started. Here’s a handy list of some tools you can use.

Free, Not Online:

• Microsoft Excel (or other spreadsheet software such as OpenOffice)
• Paper
• Envelopes

Software ($)

• Quicken
• Microsoft Money

Online (free and $):

• Mint
• You Need a Budget ($)
  
• Wasabe
  
• Yodlee Money Center

We use Excel. I’ve tried Quicken, Mint, and Wasabe in the past.

Why Excel?

• It’s “free”. Available on nearly every computer you can find (work, home, library, school…). If Microsoft isn’t your bag, try OpenOffice. (OpenOffice is a free, open source software package similar to Microsoft Office.)
• Data security. My bank information and logins are not sent to and from varying servers as with some of the online programs like Mint and Wasabe. True, our spreadsheet is on our home computer so someone could get access to it. We don’t keep any of the account information (numbers, passwords) on the spreadsheet. The largest risk we have here is I keep it on my thumbdrive that I carry with me everywhere. If someone stole it, they would be able to see how much money was in our accounts. Again, it wouldn’t show the account numbers or logins or passwords, so I think it is pretty safe.
• I can make Excel do whatever I want with the data. I don’t have to stick to Quicken’s “plan” based on my spending. I can say this charge for lunch was a work expense, and this one was me just eating out. In short, it can be simple, complex, full of charts and graphs, whatever I like — very flexible.

Why Not…?

• Quicken or MS Money — these are essentially the same program with different titles. For the most part they do the exact same thing like tracking your accounts, generating reports on your expenses, etc. I used Quicken in 2006 and was generally disappointed. There was no simple way for me to say Transaction A at Retailer A should go in one category (groceries) and Transaction B at Retailer A should go in a second category (household). Plus, you have to upgrade every year which further adds to the cost. I can generate some of those pretty reports if I wanted to with Excel and not pay a dime for it.
• Paper — Paper? I lose paper. End of story.
• Envelopes — People sometimes switch to an envelope system for budgeting. They will set aside $X for this month’s expenses and stick the money into categories within the envelopes. Once the money is gone in that envelope, you can’t spend any more money in that category. Before I bash this idea, let me say for some people this is a great first step. It forces you to control your expenses — or at least think before taking money out of your grocery envelope to pay for dining out. Otherwise, I hate these systems. Money in envelopes can be stolen and not tracked. Money in an envelope also does not generate interest. Money in an online savings or checking account can be tracked, earns interest, and is difficult to steal. The way we track expenses in categories is similar to the envelope method, but we just use a spreadsheet to show us where the money is at.
• Online tools — Wasabe, Mint, and Yodlee Money Center all require you to input your account numbers and login information so that their systems can access your financial institutions’ accounts. Instead of you inputing every transaction, they can just pull the data from your bank’s server and categorize those transactions for you. This makes me nervous. I’m sure they have security systems in place, but still things can happen. I don’t want my accounts to be compromised. I ran into the same problem with these systems that I did with Money and Quicken. They categorize things incorrectly sometimes, or in a way that I don’t think is correct. I end up going back in and moving stuff around anyways. I have used Wasabe and Mint, but not Yodlee or YNAB. Let me also note that You Need a Budget costs money and I believe it is either just a spreadsheet, or also some simple software. You can develop the spreadsheet yourself — I can show you how.

In the end you need to use what you are comfortable with. You will notice I use a lot of spreadsheets around here. Some people are intimidated by Excel, and I hope to dispel some of the mystery around the program. It really is easy to use.
I’m sure there are a multitude of other systems out there. What do you use?

This post kicks off a series that will develop my plan for getting you out of debt. This may seem an odd topic for me to tackle; the only debt we hold are student loans that are in deferral. Yet I have read, seen, and heard the damage debt can do to individuals and couples. I hope you can take a small piece of everything I write with you on your way to the land of no debt.

Before we can talk about budgets, interest rates, credit cards, frugality, or retirement… we must discuss attitude.

A negative attitude will severely hinder your attempts to climb out of debt. Why? Getting out of debt isn’t a cakewalk! They are going to be hurdles and stumbles as you climb out. You can view each of those challenges in one of two ways: positively or negatively.

If you run into an obstacle, a negative attitude will just slow you down in overcoming it. It is a true momentum killer. You have to stay focused on the end goal: getting out of debt.

Second to a positive attitude is an honest attitude. You can’t play games with yourself. Take a good, hard, honest look at your situation. Face the music. Look at everything in your situation — not just some of the pieces. Do you have a negative cash flow at the end of every month? Do you know how much you spend each weekend going out to dinner and drinks with friends?

It isn’t hard to take an honest look at the data — credit card companies and banks send you statements. You should be able to decipher from these where your money goes each month. The data is there. The only thing stopping you is you.

So be positive, take your lumps when they come, and be honest with yourself. Do that, and you are well on your way to reaching any goal — especially getting out of debt.

In part of a full disclosure effort, I thought I should share what accounts I use and for what purposes.

• Checking (for paper checks): Regions Bank
  • This is used only for expenses that must have a paper check that cannot be done via ING’s electronic checking; examples: tithing to church.
  • Interest rate: 0% (free checking, no fees, no minimum balance requirement).
  • We keep a $250 buffer in here and transfer money from ING as needed.
• Checking: ING Electric Orange*
  • This is our primary checking account. We pay 99% of our bills electronically, and this really does the trick. You can also request a paper check be sent to someone, and ING will print and mail it for you — for free. Transferring money between ING accounts and outside accounts is very easy, so writing paper checks with Regions is no big deal.
  • Current Interest Rate (1/16/08): 3.15% APY
• Savings: ING Direct Savings*
  • This is used for all of our savings goals (emergency fund, trips, holding spot until we have enough for a Roth IRA, etc.)
  • Current Interest Rate (1/16/08): 4.10% APY
• Roth IRAs: Vanguard
  • Technically this isn’t set up yet, but this is our choice. No fees if we use electronic statements. We would have chosen electronic anyways for environmental choices.
• Discount Broker: Firstrade
  • $6.95/per stock trade. Seems like the best deal around (other than perhaps Zecco). We don’t use this a lot anymore.

* - ING runs a promotion that gives you $25 if you open an account with $250+ if you were referred. The person referring you gets $10, and you get $25. Again, only if you put in $250 to start. $25 is a 10% return off of your deposit of $250 — instantly. I can give referrals for both the checking and savings account. If you’re interested, leave a comment. It’s a win-win.