Pay Your Bills First

Do you know how much money you have to spend freely at any given moment? I have an idea but if I happen to forget a bill that’s due then I might spend money that’s not available. A little while back I was introduced to a little trick when it comes to managing your money by my that has helped her know just how much money she has for her day to day spending. Pay your bills before you spend money on anything else. It’s a very logical approach but one that I overlooked for years as I was struggling with my finances.

Paying your bills first is a great way to help you live below your means. The object is to take all of your bills that are due when you get your pay take pay all of the bills you have and pay them before you spend any of your money. By doing this you end up ensuring that your bills are paid on time and you’re only left with money that is spendable. Coupled with some basic budgeting and it can help you live below your means.

If all you have left after your bills are paid is $500before your next pay you know that you can’t spend more than this and you don’t have to worry about bills coming out of your account. Getting into the habit of taking this approach may take a little time but it will prevent you from trying to juggle your debts. If you happen to be deep in debt and are struggling to make ends meet this can give you an idea of how much or how little money is left over.

Another benefit to taking this approach is that your bills are always paid before their due date and you continue to build a positive credit rating. I know that for many this is a mute point but when you’re in debt and juggling debt and spending it’s a nagging thought in the back of the mind. I know it was for me when was really struggling financially.

Finally when you know how much money you have to that is spendable you don’t have to worry about your spending as much. Being able to have money for the day to day spending is all you have to worry about which should free up any potential remorse or concern when it comes to spending money on an unneeded purchase.

The biggest thing that comes from paying your bills first isyou increase your peace of mind about your finances and budget. Personally I’mstill getting into the habit of doing this but it really makes a differencewhen it comes to knowing how much money you have for incidental spending.

Carnival of Personal Finance #150 is up

This week’s Carnival of Personal Finance (#150) is up over at Lazy Man and Money. He was kind enough to include my post about House Hunting in an Uncertain Market. This Carnival is definitely worth checking out since there are 115 posts included in it (it took Lazy Man 16 hours to put it together!!).

Weekly Review – April 27, 2008

I know this posting is a few days late but the last couple weeks have been very crazy and hectic. We have made a house purchase and we’ve placed our house on the market. Unfortunately this involved a great deal of cleaning and organizing which has taken up most of our time. I haven’t been in front of the computer at home since the last weekly update. This also means I haven’t been following the PF world or the business world for that matter.

This is very exciting time for me since I’ve never purchased or sold a house before and I never realized how stressful it was. The cleaning and organizing have really helped make our place look a lot larger and I believe much more sellable. A great deal of effort goes into getting a home ready to be sold but we’re there and we have to maintain this level of tidiness. I’ll write my impression of the whole process once it’s all finalized.

There hasn’t been much else happening in my life since this house purchase and sale took over it and I think after this week everything should start falling back into some semblance of regularity. I’ll try to carve out some time to get a few posts together in the next day or two.

5 Benefits of Using Credit Cards

Debbie Dragon is a writer for Creditorweb.com, where she writes about credit card offers, responsible credit card use, and rewards programs.

With all the focus on getting out of debt and paying off high interest credit cards, you might be wondering why I would suggest using credit cards to improve your financial situation. The truth is, there are a number of reasons why credit cards can be beneficial to your finances – it’s really all how and why you use them. Here are 5 ways to make credit cards work to your benefit:

  1. Find a credit card with a rewards program that will actually reward you – based on how you use your card. For example, if you only travel once every four years, a frequent flyer program or free hotel program is not going to be your best option. Look for rewards that allow you to earn on all of the purchases you make using the card, and that offer rewards in the form of cashback or merchandise that will actually benefit your lifestyle.
  2. Use 0% balance transfer offers to avoid paying high interest on older balances, and focus on paying off all outstanding credit card balances. This will allow you to get into the habit of using a credit card for all of your monthly purchases and paying it off at the end of each month to avoid interest, yet still benefit from the rewards program. This only works for individuals who use one or two credit cards at the most, and who are not carrying a balance from one month to the next.
  3. When in need of purchasing a large ticket item, use a credit card with a 0% interest rate for six or twelve months to give yourself more time to pay for the item without paying interest or finance charges. Take the total price of the item and divide it by the number of months you have an interest-free promotion to find out how much you have to pay per month to have the purchase completely paid off by the end of the promotional period. Keep in mind if you are late with a monthly payment, you will probably lose your interest-free status, so do everything you can to keep up with your payments on time.
  4. Don’t close your unused or paid off credit cards. Many people believe that reducing the number of credit cards on their record will improve their credit score, but the reverse is actually true for most people. If you close out your unused or paid off credit cards, you start reducing the amount of credit you have available. As the amount of credit available decreases, your debt to available credit ratio increases – making it seem as if you’ve charged almost all that you are able to charge; and putting you into a risk pool. This will often result in a lower credit score, even if you’re making your payments on time. It’s better to have more credit available – just don’t go on a crazy spending spree because you know it’s there!
  5. Credit cards frequently offer additional benefits in the form of purchase protection coverage, extended warranty coverage, and various travel insurance coverages. They don’t cost anything more but provide you with protection you can use if needed.

A Possible House Purchase

We have found a house that we like and we’ve placed an offer for; now its time for the making sure everything with the house is sound. After a few weeks of looking for a house we actually found one that we liked and wanted. We placed an offer on the house and after a little bit of negotiation our offer was accepted. Needless to say we want to make sure that everything is ok with the house before the deal is 100% done. The house inspection turned up a few things that will need to be looked at though other than the electrical system there’s nothing major wrong with the house.

Before anyone jumps on this we knew the wiring in the house would need to be replaced before we placed our offer. Other than this as a major expense everything else seems to be mostly in order. A lot of smaller to medium sized jobs over the next few years which will increase the value of the house. The only thing that remains is to make sure that there are no termites (the house is in a region that is known to have them even though the street we bought on is quiet). The whole point for us here is to make sure that we’re not buying a house with more problems than we’re ready to deal with. Some known issues that we’re planning for is one thing but to discover a massive problem such as a termite infestation would not be a pleasant surprise.

The expense of getting a house inspection in my opinion is totally worth it. And unless your uncle Bob is a real house inspector get a professional – they do this for a living and know what to look for. The report we’re getting for our $400 inspection will make sure we fix everything necessary to make the house safe and get a better insurance rate. Not to mention it minimizes the unpleasant surprises.

We’ll know the results of the termite inspection later today and by the end of the day we might have a finalized house deal. This is very exciting for me as its my first house purchase – I’ve learned a great deal about the process so far.

Weekly Review – April 20, 2008

This past week was another incredibly busy one – our house
hunt continued which also meant that we’re starting to clean our place for sale
if we find a house we like. I’ve come up with a few observations about the
whole process: first off people can be real slobs. There were a couple places
that we went into that were not only untidy but they were down right filthy. To
top this off a lot of people seemed to not care about their homes. I
understand that you can get used to some things being broken but some of the
things I’m seeing are scary. Another thing I noticed in a couple of these
houses was the shoddy work of a general contractor. It was an obvious move to
hide other flaws and was just done poorly. If you’re going to do something do
it right or don’t do it at all.

I’m not a neat freak by any stretch of the imagination but I do keep things
relatively tidy and organized. Since we are likely to find a place that we like
soon enough we will need to sell our existing one. This unfortunately means
cleaning and purging which I have been trying to do for a while with little
success. This has forced this to happen and has kept me practically off the
computer all week. The initial cleaning is done, now as long as the real estate
agent doesn’t suggest painting the walls I should be back to having some spare
time.

Other than the house hunt everything was pretty status quo this week. In
general everything has been good but busy.

House Hunting in an Uncertain Market

House hunting can be daunting at the best of times but it can be truly unnerving in an uncertain market. My wife and I have just started to look at houses to purchase. This is right around the time that things in the overall marketplace seem to be as uncertain as I can remember them. For many people this is not the time that they should start looking for a house, but for others there are many deals to be had. I can’t say that we’re debt free with huge cash reserves but we’re financially sound for this huge investment.

As some of the readers of this blog know I’m a Canadian and the real estate market in Canada and our region specifically aren’t nearly as bad as in parts of the US. Our economy has slowed a little but there hasn’t been a sub-prime meltdown in Canada. The whole world might have been impacted by it but there are many markets that are still quite sound, thankfully we’re in one of those.

Since there is a lot of risk in taking on a large purchase such as a house we’re taking what I see as a cautious approach. We’re trying to find a house that either one of us could pay the mortgage on. The whole idea here is that we’re going to make sure not to put ourselves into a situation where we might not be able to make ends meet. This does mean that we’re not going to buy the best we could possibly afford. The good thing is that we’re looking for good value and places that might need a little updating, which we can do over the next couple years.

The other thing that we’re trying to be conscious of is investment value. Our real estate agent is also very firmly in our court when it comes to this. We’ve made sure that we’re not in a rush to purchase the house and we can find the right fit for our needs as well as getting a house that will have a good return on our investment over time. The locations we’re looking in are also regions where there is a lot of potential to flip houses. The prices are going up and there is a lot of room for value increase.

The most important thing to keep in mind when house hunting in an uncertain market in my opinion is taking the extra precautions that will ensure you don’t put yourself into financial hot water. Making sure that you know what you’re looking for is extremely important. It’s not only the house that you need to consider but also the investment value of your purchase and the financial implications in the short and long term. I think we’re entering the market at a great time for us and we’ve already seen some houses that have a lot of potential.

Weekly Review– April 13, 2008

This past week has been a busy one mostly because of some personal stuff (birthdays and such). This didn’t leave me with as much time as I would have liked for keeping up to date with this site or any other side project. But I did manage to find a little time to finalize the new design. Rather than keep tweaking it to make everything perfect I’ve put it online and you can all see it now.

What do you all think of the design? Are there any issues that anyone can see? I know there are a few small tweaks that I’ll be putting into place to get everything just right but overall I’m pretty happy with it. Now its time to go back to concentrating on the writing and staying current with some of the sites I like to read.

In other news we’ve started the process of looking at another house – the market is pretty good for us right now. I expect the process will take some time to get what we want within our price range. My wife and I are taking this process slowly and I’ll write more about it in the next little while as things start to firm up a bit.

I’m looking forward to hearing some feedback about the site, I put a fair bit of effort to get it up and did everything myself.

Cars are Expensive

Let’s face it cars are expensive, from car payments to insurance costs to gas prices all of these items add up to a great deal of money. When I was younger I really took this for granted. As I got further and further into debt I started to look at where my money was going and I realized that my car was costing me a great deal of money.

Now when I see a young person driving an expensive car I wonder how they’re able to afford it. In order to have a nice car or even a new car most of us need to incur a lot of debt to get that vehicle. We need to find a way to finance that car somehow from loans to leasing the average new car will cost hundreds of dollars per month.

It still blows my mind just how expensive it all gets and that’s before the cost of actually driving that car. The simplest way to illustrate this is with my own costs. For the privilege of having a car I can drive whenever I want I have to pay the following on a monthly basis:

  • Car Loan: $350
  • Insurance: $230
  • Gas: $150
  • Maintenance: $50
  • Total: $780

All of this adds up to just under $800 per month! The really scary thing is that I drive a used car, I can only imagine what this would be like if it was a new car. If I didn’t have this car I my debt load would decrease dramatically. Until I looked at these numbers a few years back I took it all for granted and I think that a lot of people are in the same boat. We simple assume we need to have that car and that it’s not expensive. The reality is that having a car can cost you more than you would pay for your mortgage.

There are a few things that you can do to keep these costs down. First off don’t buy a brand new car especially if you’re going to need to finance it. A used car that’s a couple years old will cost you thousands less than if you were to buy it new. The best part about doing this is that with a little effort you’re likely to get everything that you want in that car with low mileage. The next item to keep the costs down is don’t drive a gas guzzling car, with the price of gas where it is these amounts can very quickly add up to hundreds a month that could be invested or used to pay down debt.

How you drive will also affect how much your car costs you; by driving slower (aka the speed limit) you’re going to burn less fuel. Not to mention you’ll be less likely to get a ticket which will keep your insurance costs down. Also don’t be afraid to shop around when it comes to your insurance; with a little bit of looking around you can find a better deal than you have and quite possibly save you hundreds of dollars a year.

We have become addicted to our cars, our cities are planned with cars in mind and we are simply expected to have them. Going to the store or out for dinner means we hop into our cars to get there even if the place is close. The transit systems in our cities also don’t help the matter since often it’s a serious inconvenience to use public transit. If you’re looking to buy a car take a serious look at how much it will really cost you to have that car and what that will mean to your finances.

The Art of Bulk Buying

If you look at anything and practice it enough it almost becomes an art form. This is very true when it comes to playing the piano or painting but I believe it’s true for most things. A perfect example in the personal finance world is buying in bulk. If you buy a product in bulk you can significantly reduce your cost per item which can save you a lot of money in the long run. Unfortunately if you’re not careful in buying in bulk you can end up loosing more money than you’re saving.

Your lifestyle or at the very least your knowledge of your lifestyle and habits can really make or break your bulk buying. Personally every time I try to take advantage of buying in bulk I end up in the same spot I started or I’ve lost money. The question that comes to mind is what am I doing wrong? The simple answer is nothing. My lifestyle isn’t geared towards bulk buying. I don’t have a regimented diet nor do I use any singular product in mass quantities on a regular basis.

The Art Form

Buying bulk means you need to buy a lot of a product or products at once and take advantage of the price reduction. The concept is very simple and it’s the basis of how retail stores make money by buying at wholesale prices. The goal here is to know that you’ll need a lot of a single product. People who have a large family can very easily take advantage of this since they’ll go through food and the necessities at a much faster pace. For me the only items that I can safely buy in bulk are toilet paper, soap and batteries because none of these items go bad.

I believe that to master buying bulk you need to plan ahead carefully to take advantage of the savings. You have to know what you’re likely to use and adjust your habits to ensure nothing perishable goes bad. When it comes to some foods they can be frozen but I’m not disciplined enough in my eating habits to effectively take advantage of this. Another great way to take advantage of buying bulk is to do so as a group of people. This goes back to my point about planning.

People who are able to save hundreds of dollars a month at stores like Costco amaze me since they have in my opinion great planning abilities (or very regimented lives). Unfortunately if you’re not careful and don’t actually use the products you can end up loosing a lot of money buying bulk and throwing out a lot of stuff. Stores like Costco love customers like me, I clearly understand the value of the purchase but by not using it the per item costs goes up drastically. Part of the art of buying bulk in my opinion is knowing when not to do it.

Buying in bulk can save you lots of money if and only if you can take advantage of the volumes.