Reader Mailbag: A Weekend Away

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What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Building credit
2. Commuting car for grad school
3. Favorite biographies
4. Moving back to big city?
5. 401(k) rollover or not?
6. Follow-up to Ticket to Ride
7. Homemade bug spray for gardens
8. Preparing for layoff
9. Student uncertainty
10. Maximizing rewards

I spent this past weekend visiting my wife’s extended family. The location was so rural that there was barely a cell phone signal and a decided lack of internet access. It was so quiet and peaceful that I found myself wanting to stay for longer.

The highlight was a leisurely walk to a nearby natural spring with my wife, my children, and some members of my wife’s extended family. We tossed rocks into a lagoon, explored the woods, wandered through a freshly harvested corn field, and played fetch with an excited dog.

What more does an afternoon need?

Q1: Building credit
My husband and I recently started looking into buying a house and found out that it is not currently possible. I have great credit (above 720), but no income and my husband has a good income, but no credit history, so we cannot get approved for a loan. The finance guy at the real estate company suggested that we get three credit cards & start using them immediately and then come back in six months. I had cancelled all of my credit cards about a year ago after attending FPU. But we have decided to go back to credit cards since neither my husband or I have ever had an issue with spending money we don’t have or going off budget. I recently got a Chase Freedom Rewards card, which I added my husband as a joint account holder to, since he’d never be eligible on his own without a credit history. Plus this way all of our purchases affect both our credit scores. My husband is trying to get an AMEX Costco Rewards card since we buy all our gas from Costco (apparently you can’t have a joint account holder on this particular credit card) so it would only affect my husband’s credit score, but his is most important since he has the income.

I know that keeping good credit is important, and at the top of the list is having credit, using it & paying it off every month. However, when it comes to specifics, I have no clue what we should do. Do you agree with what the real estate finance guy said? Should we get three cards? If so, does it matter if this card also comes from Chase, or should it be from a different company? Does the credit limit matter? Or how much of the credit we use every month? Since I won’t be a joint account holder on the AMEX card, should I get my own credit card that I don’t share with my husband? How long do you think it will take my husband to build a credit score that is approx. equivalent to what mine is? Do you have any other suggestions for building credit?
- Lindsay

If your goal is to have good enough credit to qualify for a prime mortgage loan in six months, your best bet is to do more or less what your real estate finance guy said. Get some credit cards, use them, keep the balance paid off, and the go back in six months.

The idea behind simply cutting up your credit cards as described by programs like Financial Peace relies on the assumption that you’re never going to go into debt again. Getting a mortgage is going into debt.

So, how do you buy a house without any credit? You either already have the mortgage before you chop up your credit cards or you pay for the house in cash.

Q2: Commuting car for grad school
I’m a single mom of three kids who has been running a daycare center in my home for nearly four years. Although I love my daycare kids and am making a decent living, I am starting to feel desperate for more mental stimulation and adult interaction. I already have a master’s degree, but it’s in a field that no longer interests me very much, and it would require 12+ hour days away from home. That’s just not feasible for me in my position, so I’m planning to go back to school for a degree in speech pathology next year. I think that it would be good to model study habits for my children as well (they are in 4th, 8th, and 10th grades), and I think my schedule will be more flexible in general both while I am in school and after graduation. Thanks to frugal living and an inheritance from my father, I am completely debt-free with a year’s emergency fund, and the sale of more property from his estate is currently being negotiated, that will finance a significant portion of the education costs (about $60k). I will probably still need some loans, but I have always paid off my debts early, and all my research tells me that the shortage of speech therapists should result in excellent job prospects upon graduation.

Going to school will require a 56-mile round-trip commute most or all days of the week. I currently own a 2002 Toyota minivan that I use primarily for very local travel. My oldest child will be 16 in March and my second will be 16 in the summer of 2013 (although getting their license is largely dependent on their academic performance). So I am considering buying a small, economical car for commuting. Do you feel that the gas savings will offset the additional costs of the car purchase, insurance, and maintenance? I think there will also be a convenience factor in having kids who can drive and help with household tasks, that will also be offset by the safety concerns of a mother!
- Shanda

Well, let’s do the math on this. Let’s say your current minivan gets 16 miles per gallon and you replace it with a car that gets 32 miles per gallon. With gas at $3.50 per gallon, you’re going to save $30.63 per week in fuel, or $120 per month.

Now, does that make purchasing a small economy car worth it? Unless you buy a very old car (and thus an unreliable car), you’re not going to be spending less than $120 a month on the payments and insurance on it. In terms of pure dollars and cents, buying an economical car right now will cost you more, not less.

If your plan involves having your kids start driving the van for local use, though, this may still be a good decision.

Q3: Favorite biographies
What are your favorite biographies? I’ve started reading a few and I’ve found some are amazing and some… not quite so much.

- Ben

I can name a lot of biographies I’ve loved. I’ll just stick with two more recent ones.

Open by Andre Agassi may be the best sports autobiography I’ve ever read. The openness with which he addressed personal failure was stunning.

Einstein by Walter Isaacson humanized the science genius in an amazing fashion. He moved Einstein from mythical figure to real person with a steady hand.

I’m actually currently reading West on West, an autobiography of basketball legend Jerry West and his struggle with depression, and I’m really looking forward to Steve Jobs, written by the abovementioned Isaacson.

Q4: Moving back to big city?
I moved from Phoenix 3+ years ago after selling my small business (a Montessori preschool) and buying a cabin in the mountains for cash. I also went to graduate school and earned an MFA in creative writing in Dec. ’10. When I first moved here, I loved the small town atmosphere. I still do on many levels. When I moved here, my boyfriend also moved here. We lived together initially, then lived separately but still dated and have now split up for good.

My question is whether it seems sane to move back for social connections and job opportunities…or is this magical-the-grass-is-always-greener-on-the-other-side thinking?

My current job is writing for an online company which can be feast or famine financially. I don’t have a house payment up here and would have to pay rent down there…but is it worth it to give it a shot? I have a friend who is willing to rent me her guest house at a moderate price. Or should I just dig in here and make it work?

Currently, I’m frequently strapped financially and lonely up on the mountain without that man in my life (who I no longer want in my life). I have one good friend here and multiple acquaintances. My grown kids live in Phx.
- Sarah

Two questions. What do you want to do? And, more importantly, which route has the most potential for something great to come out of it?

My feeling, from your email, is that you want to move back, but you’re worried about having the finances to make it happen. I suggest that you follow your heart. I’d seek other freelance opportunities to fill your hours when you’re underemployed.

Life is too short to sit where you don’t want to be, lonely and waiting for something better to happen. It’s time to go make it happen.

Q5: 401(k) rollover or not?
Should I leave my money (401k) in my bank or roll it over to either Vanguard or Fidelity? My banker is kind of evasive about what the fees are. He said I have already paid the up-front fees. I feel like I should move my money for lower fees and get a better return, but I’m not sure.

- Cindy

If your banker is being evasive about fees even after they were requested, then I would roll things over to another bank. That’s just not good behavior.

I’ve had experiences with financial professionals who seemed to spend their time avoiding giving straight answers to the questions of their customers. Every time I’ve encountered this, I’ve exited the stage as quickly as possible.

A big part of personal finance is the numbers. If you can’t get the numbers, don’t trust your money with it.

Q6: Follow-up to Ticket to Ride
I followed your suggestion last Christmas and picked up a copy of the board game Ticket to Ride for me and my wife last Christmas. Since then, we must have played it a hundred times! It’s a great game! Of course, with having played it that much over the last nine months, it’s starting to be just a bit stale. Do you have any good game suggestions for us?

- Charlie

It really depends on how it’s getting stale. If you’re just getting tired of the map and you seem to be just exploiting the same routes over and over, try getting one of the Ticket to Ride Map Collections (here’s the other one). That will give you plenty of fresh terrain to find routes on.

If you’re looking for a new game with a similar complexity, I would suggest trying Carcassonne, which is a game where you build a map together of the French countryside, or Thebes, where you’re excavating an archaeological dig.

Another approach would be to simply find a gaming group, like Des Moines’ own Community Game Night. Many larger cities have these, where adults gather once a month or so simply to play a wide variety of board games. It’s a great way to meet people who also enjoy gaming and try out a lot of games.

Q7: Homemade bug spray for gardens
Do you have a mixture for bugs in the garden? And/or something that is eating at my squash plants – something to mix up that we can spray on them. I used to have one but can’t find the recipe. It was dish soap & something?

- Rajiv

There are lots of bug sprays that work with varying degrees of success, depending entirely on what bugs are attacking your garden.

The one we use as a general purpose spray is a mix of four parts water, one part dish soap, and one part rubbing alcohol. This seems to get rid of a lot of pests.

If this doesn’t work, we take a bunch of leaves from our tomato plants, mash up a few garlic cloves, and let the leaves and cloves soak in a mix of four parts water and one part alcohol for a few days. We then strain the liquid and spray it on with a spray bottle.

These two take care of almost everything save the dreaded Japanese beetle.

Q8: Preparing for layoff
I am going to be laid off at the beginning of next month. I’ve been applying for jobs but there’s a good chance I won’t have anything lined up by then and will have to go on unemployment. My husband is self-employed and his pay is variable. There’s a good chance that we simply won’t have enough income to pay our bills, even though we are doing everything we can to reduce them.

My credit score is currently 805 (hubby doesn’t have credit) and so I got a $4000 personal line of credit at my bank for emergencies (at 7%). I’m worried that if I am actually unemployed, my credit score will drop and the bank may revoke the credit, AND I may not be able to use my credit cards either as they may lower my limits. Other than saving as much as possible, what do you suggest I should do to prepare? Should I simply borrow money now and put it aside (we won’t spend it unless we need it)? We will have about $4000 in expenses each month (since I’ll have to get Cobra at $1000 a month) and we will only have about $3300 coming in, as long as my husband has work.
- Rachel

Obviously, your first line of defense is to start living as cheaply as possible. The more cash you have on hand, the better.

If you’re expecting unemployment, you should start your job hunt today. Not next week or next month. Polish that resume until it shines and start sending it out right now. Don’t wait around for the official pink slip. Also, don’t be afraid to accept a position in the short term that’s “beneath” you.

You also should check into unemployment offered through your job, as well as any severance packages. Employers prefer that you don’t get such things as it saves them money, but you have the right to it.

Q9: Student uncertainty
I graduated with my degree and $8000 in debt. When I graduated I could not find a position (retail or anything) for quite some time. Emotionally, this frightened me: I’ve been working since I was a teen and saving for my education. Since that time I have found a decent position which pays alright. I also cut my budget down to a minimum. During this time I really questioned what I wanted out of life and was really honest with myself – and I want to go into teaching. To do so, I essentially have to do 2 more years of university for teachable subjects and then the professional development program for another year. During the 2 years of “upgrading” my degree I will continue to work – but at a bit of a lesser rate.

I’ve cut down costs as much as I can. I’ve moved back home and pay a modest food and boarding amount. By December I would have paid off all debt and have $1000 in emergency savings.

Essentially my conundrum is what to do… I have two options – get my pre-requisites completed in two years. Or get them done in three years… With my current projections and modest lifestyle I will still have to take out $7000 in student to cover the cost of training to be a teacher with the first option. However, the longer I stay out of getting into teaching, the longer it will take me to get a classroom in the province I live in. Do I work the extra year and try to save more money to cover the costs? Or do I take the leap and get the training done and hope to get a position after? Since the world seems to be in such a tumultuous state (or may be it’s just the reality of the real world work setting in) – I don’t know how to quantify and qualify the opportunity costs. I feel that I will feel worn out by the amount of work, schooling and volunteering I have to do either way. However, I don’t want to stretch out the route to a professional career which would put me on the track to better earnings…

How do I go about this choice? I will have no retirement savings and I feel like I am penny-pinching (I track every cent and will more often than not decline coffee nights/ restaurants and re-evaluate every purchase). My social life has been slashed as I’ve moved away from my friends for work and school. Stress levels are high but currently manageable. This question is as much about finances and it is about keeping mentally healthy.
- Chris

Choose the path that you feel leads you toward the best mental state. If that means going to college right away and putting on a bit of extra debt, do it.

Mental well-being and a sense that you’re moving in the right direction in life is incredibly valuable and is usually worth a bit of student loan debt. I know far too many people who put off education, found themselves getting slogged down, and wound up on a track in life that led straight to unhappiness.

You’re living frugally enough that you’ll minimize your expenses, which means that you’ll minimize your debt load during this situation, too.

Q10: Maximizing rewards
I have a Mastercard that gives me Airmiles on all of my purchases, which I use for basically all of my purchases and pay off each month in full. I use these points (if I have enough) to buy flights home several times a year. I get 1 Airmile per $20 spent on the Mastercard, plus any bonus points offered at the stores I visit. These bonuses range from 1-50 Airmiles, and I only partake in the bonus offers (eg. buy 3, get 20 points) if it’s an item that I will use and already buy, like shampoo. One-way flights range from 500-3000 points plus service taxes.

I have several friends who swear by the President’s Choice Mastercard. This card gives you 10 points per $1 spent, and 20,000 points gets you $20 in groceries at any Loblaws store (Great Canadian Superstore etc). They like it because they get free groceries every couple of months from the points they’ve earned. I’m thinking about getting one, but using it would decrease the number of Airmiles points I could earn.

My question is: is there a good strategy to maximize my rewards, like flights and groceries, with two or more rewards programs? Should I just worry about saving the most money/earning as many points as I can with one program? How do you choose? Are point-based rewards programs really worth it?
- Anna

The President’s Choice card actually isn’t that good of a card. Let’s say you run $2,000 through that card, earning you 20,000 points. That 20,000 points becomes a $20 discount on groceries. You’re essentially earning a 1% reward, which is lower than you can get on a lot of other cards.

Your Airmile card seems even worse. 1 Airmile per $20 spent is a horrible rate. Most airline travel credit cards offer one mile per dollar spent, with additional bonuses for other purchases. The bonuses described here make up for it, but the baseline rate is bad enough that I would avoid the card for most purchases.

I would suggest researching some cards carefully and moving to one that offers a return of at least 1% of your purchases in value. My card from the local gas station, for example, returns about 3% on every dollar spent.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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31 thoughts on “Reader Mailbag: A Weekend Away

  1. For Q10 (Anna)

    I have just a quick word of caution re: Trent’s advice to find a card with better rewards.

    Do the cards you use have annual fees? That’s something to consider when comparing cards — paying an annual fee can certainly be worth it (depending on many factors) but it should be considered carefully as a fee really eats away at savings quickly.

    Also, the rules governing credit cards and banking are very different in Canada. I wonder if banks/credit companies even offer the same level of rewards here. I have no idea. Anybody else know?

    Canada and the US are not the same country (at all!) and answers from an American financial blogger may or may not apply in Canada.

  2. Q1: “So, how do you buy a house without any credit? You either already have the mortgage before you chop up your credit cards or you pay for the house in cash.”

    Or you go to a credit union that does manual underwriting. The couple mentioned FPU, so I’m surprised that this option wasn’t even mentioned, as Dave Ramsey frequently recommends this when people ask him about credit scores and mortgages. I wonder if Lindsay and her husband even looked into this possibility, or if they were already looking for an excuse to get credit cards again.

  3. @Kevin

    “I wonder if Lindsay and her husband even looked into this possibility, or if they were already looking for an excuse to get credit cards again.”

    That seems unduly harsh. It’s more likely that they simply weren’t aware of it, if their loan officer didn’t mention it as a possibility.

  4. And in answer to your question . . .

    Anna, I would just think carefully about which card would give you more value. Is saving money on groceries more valuable than collecting Airmiles? Which would help you out more?

    For instance, if making ends meet on a weekly or monthly basis is difficult, then being able to grab a free load of groceries once or twice per year might really make a difference (and allow you to say, put the money you would have spent into savings for an emergency for for your flights home). Therefore you would go for the PC card.

    Or, if you have a comfortable budget but would rather have free flights home, maybe Airmiles are more valuable for you. Therefore you would go with the Airmiles card.

    One thing to consider, you can actually purchase gift certificates for grocery stores through the Airmiles website. I collect Airmiles and buy these certificates once per year. I then use the equivalent amount of money to put towards something I’m saving for. They also come in handy around Christmas when I buy tons of baking supplies.

    But it certainly don’t hurt to look around for cards with better rewards, but as I said above, don’t forget to factor in annual fees. My personal policy is that paying an annual fee isn’t worth the reward, but ymmv.

  5. @Tracy: “It’s more likely that they simply weren’t aware of it, if their loan officer didn’t mention it as a possibility.”

    But it would have been mentioned in FPU, which she said they attended. Dave also mentions this often on his radio podcasts.

  6. Kevin

    They do say they have never had an issue with budgeting or over-spending with credit cards. Why do you automatically thing having a credit card such a bad thing?

    I actually think credit cards are important tools. The truth is, credit score is used for a lot of things these days and there can be real benefits to maintaining a good credit score through responsible use of credit cards. Additionally, there are significant levels of consumer protection built into using a credit card and there is also the opportunity to build rewards.

    I don’t think any financially-responsible individual needs an “excuse” to get a credit card

  7. Q5 doesn’t make any sense to me. How did the 401(k) get into the bank? Current 401(k)s go to the investment institution mandated by the employer plan, don’t they? Who has the opportunity to switch banks inside their 401(k)?

    This sounds like Cindy has already rolled over her 401(k) to an IRA, and is now thinking of moving her IRA to yet another institution. Banks (of any kind) are generally not good institutions to hold your IRA, so Trent’s advice to “things over to another bank” is not good enough. Pick an investment house like Vanguard or Fidelity, if you’re going to roll your money over again.

    In the meantime, ask your banker what front-end fees you’ve already paid to purchase their investment products, what the (total) maintenance fees are, and what back-end fees you will pay when you move your money out of their institution.

  8. Riki: Don’t get me wrong, I have 2 credit cards of my own. I’m just saying, Lindsay and her husband did FPU and cut up their credit cards, so by all appearances, they decided to extirpate credit cards from their lives. Now they’re considering adding them back in, so it just seems a little contradictory to me. Are they following the Dave Ramsey plan, or not? If they’re no longer drinking Dave’s Kool-Aid, then they don’t need Trent’s “permission” to get credit cards – they should just go out and get them.

    I just got the sense that they still want to belong to Ramsey’s “Debt Slayers” club, but they want to dip their toes back into the debt pool at the same time. And if anyone calls them on it, they can say, “We didn’t have a choice, we had to go into debt in order to get a mortgage.” I just want to point out that that’s not actually true. Credit Unions can do manual underwriting and will fund mortgages for people with no/poor credit scores, but verifiable income and assets.

  9. Q8 – Trent’s answer doesn’t go any farther than what Rachel says she’s done already.

    First, find out how much your unemployment benefits will be, and the lag time for receipt of the first check. [Our state has a great online system for the unemployment department, or your HR department at work should be able to assist you in this.] You don’t mention any emergency fund other than the LOC. You’re correct the bank most likely will cancel the LOC when they find out you’ve been laid off. Before taking money out of the LOC in advance of the layoff,check the fine print to be sure the balance doesn’t come immediately due if the account’s cancelled.

    If you can’t land a job in your field immediately, consider temp agencies – more and more companies are using temps at all levels, and working that way can get you a foot in the door if they do have positions open in the future.

    You don’t say what your husband does, but it may be he will need to get a second job somewhere too, or hustle more to get more $ coming in through his primary line of work.

    If you don’t find a way to make enough income, your only recourse is to sell off items and truly go on a bare-bones budget, using every way you can track down to save pennies and dollars until you get the $ coming in again.

  10. Kevin: I see your point, certainly.

    However, I don’t see how getting a credit card automatically equates to going into debt. Can’t they just use the card and pay it off every month?

    You are right about the manual underwriting, though. Trent should have raised that as a possibility. I’m not surprised at all that the “financial guy” at the real estate company didn’t bring up manual underwriting — he’s probably a broker and companies he deals with probably don’t offer the manual underwriting. He wouldn’t want to steer this couple towards a different business.

    This couple needs to pound the pavement and do their own research on mortgages. Maybe they’ll have more success than they realize. In my experience, talking to the in-house broker at the real estate company isn’t the best place to start.

  11. Q1 – The highest credit scores usually are because of long-term established good credit, so I’d be curious how decent a score one can build in 6 months.

    Alsok, I thought FPU says people should pay cash for a house instead of carrying a mortgage. Maybe the answer is to simply start saving up the $ instead of getting the CCs.

    On the other hand, if her credit is so great, her husband could get a secured credit card on his own to build his.

  12. …AMEX Costco Rewards card since we buy all our gas from Costco (apparently you can’t have a joint account holder on this particular credit card)

    I got one last year with my wife as a joint cardholder. We’re both on the same membership, maybe that’s where the issue is (didn’t specify if you were actually a member or just frequent the gas station). AMEX is notoriously stingy as well…
    If they don’t have budget problems, I don’t see why you shouldn’t use rewards credit cards. I question why they cut them up in the first place if it never was an issue. Ramsey has good ideas and opinions, but it doesn’t mean you need to blindly follow his methods 100%.

  13. On Q3: I loved Gene Kranz’s book “Failure Is Not an Option”. It’s a great book about making things work in the face of seemingly impossible issues. If you liked the movie Apollo 13 at all, you will like this book.

  14. Q4 – I made a big move several years ago for similar reasons. I followed my gut and took the jump, giving up my work and my cheap rent-controlled apartment to move back to where I grew up to be with my boyfriend (now husband) and near my family. While things haven’t always been easy, it was totally the right decision, and I haven’t regretted it for a moment.

  15. Q1 – Getting any new cards will temporarily hurt your scores. I’m skeptical that 6 months is enough time for them to recover. Opening new credit lines is a bad thing (score-wise) but having long established, active accounts is a good thing. If you are looking to get a mortgage soon, I don’t think you have time to build your score up very much. Manual underwriting is your best bet.

    Also, I’m surprised it is not mentioned, but credit cards alone are not going to be enough to raise your score into the best interest rate bracket. You need a mix of credit types, and history history history. If you *really* want to raise your score, take out a car loan and pay it off over the course of 6 months or more. Do the same with a personal loan, and a student loan for good measure. There is a reason Ramsey calls it your “I love debt” score. A CC will get your husband a history, but to achieve a good score (which will get you a good rate) you’ll need to take on actual debt. Fortunately, ratios count rather than amounts. You could take out a $1k loan on your car (assuming it is paid off already), and you won’t pay too much in interest in 6 months. If you have some time before getting the mortgage, the cost to improve your score should be more than offset by the amount you save by getting the best possible rate on your mortgage.

  16. Q8 : DO you absolutely have to go with COBRA? You might due to existing conditions, but it is worth shopping around for other coverage. You may be able to find an independent plan with decent coverage for far cheaper. Or you might find a plan that is equivalent to your current insurance for cheaper than $1000.

    You definitely need to cut any/all expenses as much as possible. Where is the $3000/month outside expected COBRA going? Have you canceled cable? Are you eating out at all? Did you shop around for cheaper insurance?

    I don’t think theres any reason to have your credit score immediately cut due to unemployment. Credit bureaus don’t actually track employment or income at all as far as I know. Theres nothing in my credit reports about employment or income. The credit bureaus do NOT track your unemployment. I verified that from Experians website where they say : “Credit reports do not show unemployment filings or unemployment claims.”

    Q10 : You have to figure out how much the rewards are worth in terms of cash or % return. Trent is right that the Presidents Choice card is returning about 1% which is very typical base rate for rewards cards. Trent is confusing your “AIR MILES” with other various airline miles rewards systems. Your flights only cost 500-3000 miles. So your miles are worth much more each compared to most of the airline miles programs in the USA.

    You need to figure out : How much do those miles save you in dollar terms? Lets say you’re flying from BC to Calgary and the flights normally cost $400 round trip. If you can get that flight for 1000 miles then your miles are worth effectively 40 cents each. You get 1 mile for $20 spent so you’re basically getting 40 cents / $20 or 2% return. But on the other hand if the flights you take are usually only $200 round trip and cost 1200 miles then you’re getting just 16.7 cents per mile or a 16.7 cent/$20 equal to 0.837% return.

    It really all depends on how much the flights cost if you were to buy them in cash versus how many points you spend to get the flight and how much money you charge to get those points. Plus on top of all that you have to take into account any annual fees you might pay.

    Because you get various bonus points it might be easier for you to look at a years worth of spending and see your total airmiles balance for the year. Look at your statements and add up all the money you spent and add up all the points you got. Then divide points / money to see how many points you get on average versus the money you spend.

  17. Q1 – The American Express Costco cards do allow *additional* cardholders, but do not allow “joint” accounts. Whoever applies for the card is the one primarily responsible for the bill. They can then add people as additional card users but those people have no authority to handle issues with the card. The Costco products are fee free cards, but each person on the account has to be a member of Costco. Like any reward product, you have to be careful if you want to maximize the rewards you get. The credit card companies offer rewards to entice you to spend more, bottom line.

  18. I have been using credit cards since 1990. Never paid a dime as interest. It is doable as long as you keep good track of your spending.

  19. Credit cards aren’t the bogeyman. If you pay your cards off in full each month, why NOT get the rewards offered?

  20. Q9 – Have you looked into alternate route to teaching programs? Teach for America is the most well-known, but there are a ton of them (The New Teacher Program, Baltimore City Teaching Residency, Boston Teacher Residency, NYC Teaching Fellows, etc). They let you get your teaching degree WHILE you teach and WHILE you earn income (you need an undergrad degree to start with). Most of the programs service lower-income schools, which might limit your geographic options in the short term, but once you get your certificate you’re certified in that state and can try getting a job elsewhere.

    Defiantly not for everyone (the schools they serve are hard to staff, and sometimes with good reason) but if you’re looking for another option, one of these kinds of programs might do it for ya.

    Best of Luck!

  21. Dave Ramsey often references a study that he says shows that people spend more money when buying with a credit/debit card as opposed to paying cash. Apparently there is a psychological element to paying with cash that is diminished when using a card. I don’t know if there is anything to this claim or not, but it could be an explanation for why credit cards can be bad even when paid off in full each month.

  22. @Q10. I’m Canadian and also currently collect Air Miles instead of PC points. I did the math like Trent did and found that Air Miles return was a bit under 1% – roughly around 0.8%. Because the flights are variable in price and still have the cash portion, I used the gift certificates to calculate this. I only looked at a few companies gift certificates, but it was really easy this way to compare amount spent vs. cash reward. I decided to stay with Air Miles for a few reasons: Many more options of how to spend the miles; the difference in rewards isn’t worth the hassle of starting something with PCF since I’m not currently a PCF client and have plenty of banks already; long-term history and good client service with BMO. If there was a good cash back credit card that offered more than 1% I might consider it, but 1% is such a small amount that it’s barely worth worrying about. I also have to buy groceries regardless but getting cheap flights makes it a bit more likely we’ll take a vacation since we have a harder time justifying spending money on non-essentials. (Too frugal, not poor.) And I really need a winter vacation.

  23. Also, a year or two ago when there was such a big deal about the credit crisis, BMO actually REMOVED the annual fee on my Mastercard, completely out of the blue. So I definitely do have some company loyalty there that I don’t have with PCF. Not that they make any interest off me.

  24. #23 Jonathan said : “Dave Ramsey often references a study that he says shows that people spend more money when buying with a credit/debit card as opposed to paying cash.”

    Ramsey quotes a Dun and Bradstreet study that supposedly claims people spend 12-18% more with credit cards. Nobody has found the actual study. Someone from another blog contacted Dun and Bradstreet and found that the study doesn’t exist and Dun and Bradstreet never said it. Its apparently an urban myth.

    There are other studies that claim that credit cards increase spending. But the Dun & Bradstreet and 12-28% number are apparently mythical.

  25. For #10 Anna – Canadian reward rates on credit cards are not as good as in the USA, however you can do much better than the PC financial card or the Airmiles.

    By far the best *no-fee* card in Canada is MBNA Smart Cash. No annual fee and 3% cash back on Gas/Groceries and 1% on the rest. You will get 5% during the first 6 months on Gas/Groceries. The 3/5% cash back is up to $600/month max spend.

    Cash back comes every time your account hits $50 and they mail you a cheque. Much better than many others who credit you annually.

    PS. Did you know you can buy lots of things at the grocery store.. Like restaurant gift cards, clothing, etc. Easy to make most of your regular purchases hit 3% if you plan ahead. Walmart Supercenters (with the food aisles) should also count under groceries. Good luck earning free cash back!

  26. Q8, Rachel, I second Jim’s suggestion that you check out an individual health insurance plan as an alternative to COBRA. With COBRA, you are paying for a continuation of the coverage you had at work. For many people, that coverage is far richer and more expensive than they really need. Go over your past three years or so of health care usage and see whether you really need all the coverage COBRA is giving you.

    Another task before lay-off and before you decide on whether to take COBRA or buy your own health insurance: Take care of any health treatment needs that you may have been putting off and that are covered by your current insurance. Check-ups, immunizations, colonoscopy if you’re at that age, mammograms, etc. Fill all covered prescriptions as far out as your policy and doctor allow.

    Make sure you understand your company’s vacation/sick leave policies. Some allow you to cash accrued leave out at 100%, others don’t.

    Check out your state’s unemployment agency website from the employer’s standpoint and become familiar with any incentives the state or the feds offer employers for new hires. Often, small employers aren’t even aware of those incentives and may be more agreeable to your pay request if they know some of it will be reimbursed through incentives. Make sure you know what the requirements are to obtain the benefit. Often, the employer has to register before hiring anyone, and/or must hire through the unemployment service.

    On a separate note: If you are one of several being laid off at the same time, you might consider exchanging email addresses and resumes from others in your situation. In your job search, you may run across a job that won’t suit you but might suit a former colleague, or vice versa. Word of mouth is one of the best ways of getting work. I recently had a former employee contact me about becoming unemployed. (Because of distance, she wasn’t looking to return to work for me, just needed a reference.) With her approval, I put the word out to a half-dozen people I knew in her locale, and within two weeks she had received a more than a dozen good leads and three interviews from those contacts.

  27. Preparing for layoff
    1. Don’t take out a loan that you can’t make payments on.
    2. Check for insurance else where, if you are in good health you might want to look at a Major Medical or high deductible policy.
    3. Talk to your friends, let them know what is going on, network network network, maybe someone knows of a job.
    4. You didn’t mention children, if you have children don’t scare them to death about your job loss. Also check into the Angel Tree and agencies that can make the holidays easier for them and you.
    5. I don’t know what part of the country you live in but winter proof your home, plastic on the windows, caulk around door and window frames, etc. what ever you can do to keep your utilities low.
    6. Lose the cable, Netflix, extras on your phone, use the library for getting your entertainment.
    7. Temp agencies are a great way to find work.
    8. Volunteer, I know this sounds crazy, but many places like hospitals give free lunches if you volunteer. It looks great on a resume, you might get a job, and it keeps you busy, you can’t job search 24/7, so don’t sit around and mope.
    9. Can you help your husband with his business?
    10. Look at your talents, can you do something with them to make extra money?
    Everything is pretty much common sense, contact your creditors and see if you can get lower interest rates if you have a balance on your credit cards, you don’t have to say you will be losing your job, just look for better rates. Contact your insurance agent and see if you can get some savings on what you pay. Place things in an order, a roof over your head, utilities (electric, water, gas and a phone is all you need), inexpensive food, not cheap food, if you have been reading this blog you know the difference. Good Luck.

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