• Maybe it’s a fool’s game, but it’s my game

    Credit cards

    Image via Wikipedia

    ** Huzzah! I’m in this week’s Carnival of Personal Finance. Thanks to Well Heeled for hosting. **

    Spending $25,000 on a credit card over two years is unlikely to earn you even $180 on reward schemes, a survey has revealed.

    I consider myself a savvy credit card user, and stories like these annoy the hell out of me.

    Unless you spend heaps on your card…and fully pay off your card at the end of each month, most of these schemes won’t be worth it.

    Well, no shit, Sherlock. That’s the credit card game, isn’t it? Don’t spend more than you can repay, and you win. Plus you get points or cashback. There’s nothing good about the alternative.

    Sadly, unless you manage to be completely self sufficient – work for yourself, grow your own food, generate your own power and so forth – you need to spend money.

    I will admit, I’m not making oodles of money from CC rewards. In fact, I would need to spend $27k to earn $180 in rewards. But I certainly am making something for nothing. If I must be ripped off by supermarkets, petrol stations and the like on a regular basis, I’m going to claw back every cent I can.

    Let’s say $150 a week goes on the Visa (a ridiculously low number. That’s full groceries plus bus topup, or perhaps petrol plus a supermarket shop minus meat and veggies.) That earns $1. That’s $52 in rewards for $7800 spent in a year for doing nothing but LIVE LIFE. Or perhaps a more realistic $200 a week, earns $67.60 a year. That does not include the countless other expenses which crop up over those 12 months. Insurance. Clothing. Mystery shops. Concerts. Other dining out. Presents. Travel. Car registration and repairs. Purchases made for people we know who don’t have their own credit cards. Oh, and I can now pay Sky TV by Visa for no extra charge.

    In fact, I put everything I possibly can on my credit card, and only regret I can’t do the same for rent. At a guess that might double or triple what we put on the card, and thus earn rewards for. One has to feed, dress and transport oneself, and this one would rather get something out of it. In the meantime, my money earns a little bit more interest in my account, which is calculated on a daily basis.

    Quite frankly, I would find it near impossible to live without a credit card. I buy stuff online semi-regularly, from contact lenses to guitar strings to daily deal coupons to event tickets to hotel bookings. (Well, some of those are more regular than others.) My other options would be to, uh, ASK someone with a credit card to do it for me, or get one of those Visa Debitplus cards. In which case, I may as well get a real Visa, with a rewards programme. I don’t doubt Visa Debitplus is a fabulous option for many people, but it offers me absolutely nothing. The idea is you use your own money, but you do get charged a fee for it. I’d rather use the bank’s money for a month and earn wayyyy more than enough rewards dollars to cover the higher fee. And I won’t even get into the other benefits that some credit cards also offer.

    I get it. It sounds like too much trouble for some people, especially given our relatively crappy rate of return. Especially for those who have fallen into the debt trap using credit cards. But others, like me and my mother and many more, can handle ourselves. And who else would book tickets online for our friends and family with shot credit and who don’t have a Debitplus for whatever reason? If you can handle money responsibly, there’s a bit of free money in there for you.

    Please. Trust us. We’re grownups and we know how to play the game. Maybe the majority of Kiwis don’t, but there’s no need to treat us all like imbeciles. Or is there?

  • Dealing with a partner’s debt

    Dealing with a partner who's in debt

    Hands up those with a partner saddled with debt. Do you ever resent him/her for it? Do you feel like it’s holding you back?

    It’s okay. Our feelings are ours and they are legitimate. And sometimes you just need to let them out and acknowledge them.

    Sometimes I wish I were the indebted person. I make more. I could pay off more, faster. What’s more, I’m not naturally a spender. (Maybe you snort at that having followed my blog for awhile. But my personal spending tends to fall along the lines of concerts, travel and eating good food. I don’t have a latte factor. I agonise over purchases. I don’t have or need a personal allowance. I would rather save my money than fritter it away on milkshakes and burgers or CDs or shoes.) In short, I would throw everything I had at debt until it was gone. But T is not like that.

    Don’t get me wrong. The debt is not massive, it’s only in the four figures. And about half of it is to me. The rest isn’t even incurring interest. Not from ongoing living costs when I supported him (I chose to do that myself) but the other things – money lent after a long-ago car accident, car repairs, car insurance. Okay, mostly car related things. And a few other bits and pieces.

    You know how I like to browse real estate listings for fun/self-torture? He likes to browse listings for motorbikes. That’s the next thing he wants to buy. The big thing. And of course he’s always finding amazing deals that if only he had the money he would buy right now. To which I can only say, you just spent hundreds of dollars on car audio! Obviously having doof doof sounds on your commute was more important than anything else to you, so you’ll just have to wait. The right bike will come along when you’re ready.

    Of course, he could save for it faster if we directed all his spare into savings and none toward repaying me. And that’s a decision he leaves to me. That’s kind of a crap choice. Basically, it’s a battle of selfless vs selfish.

    Sometimes I think maybe I should just write it off and we can start with a clean slate. But that’s not fair to me. That’s money I’ve worked hard for. Money that I chose to lend knowing it would be returned eventually. (And yes, money I could afford to give in the worst instance.) Maybe I should forget my random notion of insisting he maintain a $2k EF, because realistically, I would not drain it. As a first step, I would front the money, because dipping below that number is such a psychological blow. (I KNOW. IT’S NOT EVEN MY MONEY. WTF IS WRONG WITH ME?)

    Even if it’s not yours, debt sucks. It hinders individual goals and joint goals. For him, it means no bike – for now. And for me, it means travel can’t happen as soon as I’d like.

    I veer between wondering WHY AREN’T WE FURTHER ALONG YET??!! – after all, he’s been out of school for five years (didn’t go to uni) and sometimes it feels he has nothing to show for it. Meanwhile, I often feel similarly. But I have to remember I’ve only been working FT for a year, and I just paid for a car in cash. He’s sustained stints of unemployment, and yes, paid off other debts in that time. (The most frustrating thing is that very, very little of it was actually incurred by him. But let’s not get into that.) It hasn’t all been smooth sailing. Yeah, I veer between that and trying to reassure myself that we have years and years ahead of us. But do we? In 10 years I would like to have bought a house and started a family and done my two big trips: the US and Europe. Blarrrrrgh.

    I don’t want it to sound like we are clashing financially. In fact, it’s all going pretty swimmingly, albeit slower than I’d like. Joint pots with a separate allowance for him is working great and while initially that made me nervous, he’s been really good about communicating on money matters. But every so often, when progress feels nonexistent, you need to have a verbal retch. Ya know what I mean?

  • Money for couples: The contributions conundrum

    MONEY FOR COUPLES - managing joint finances and budgeting together

    Joint finances for couples

    When it comes to finances for couples, most people fall into two camps: The 50/50 split and the proportional split. (I’m excluding couples where income disparities are massive, for example, when one makes double what the other does – there seems to be general consensus that proportionate contributions are more appropriate then.)

    I decided to go with the latter in our case for a couple of reasons.

    For one, I make more. It’s not a huge amount, but it’s more than small change.

    And secondly, his income varies. Generally he works quite long hours and sometimes does Saturdays, but that’s not always the case. The difference between a 40-hour week (or less on occasion, as once their systems were down and everyone sent home) and a 55+hour week is significant.

    Since I’d been covering all our expenses for a few months prior to this anyway, the easiest route was to continue doing that, and just bank his contributions – barring an extra $10 a week into our “irregulars” account – directly into my savings.

    My driving guideline is pretty simple: What will leave us both better off?

    Flexibility, I think, is key. On weeks he brings in less than usual, then he puts less towards our expenses. It might come down to a choice between saving or debt repayment. And because the debt we’re focusing on is, well, to me, savings comes first. It’s not super-urgent nor is it accruing interest.

    We recently got a $320 AECT dividend, and while I decided to leave my half as a credit on our power bill, his went toward his EF. His circumstances mean that building up that safety net is paramount, while it’s not so much of an issue for me anymore.

    I do all this with an eye to the future – like I’ve said numerous times before, we’re planning for a future together, and although not all our money is merged, one day it most likely will be.