Tag Archives: finances

Let’s Ask: UE’s Finance Guru

So far, Sara Hamling has done a wonderful job of effectively enlightening the financially frazzled. But some of us are just a bit more money-muddled than the others, so fellow UE contributor Michael Cox instigated a intense investigation into our investments.

Michael: Hi Sara, thanks for helping us out again! I like the way that you laid out some ideas for what is and what is not okay to spend money on from short-term and long-term spending accounts. Do you have similar advice for credit purchases when the ol’ short-term spending account isn’t up to snuff for (perhaps pet- or car-related) emergencies?

Sara: So your short-term savings account isn’t as full as you need it to be, and you’re facing a true emergency: you lose your job, your car needs new brakes so that you can get to work, you have a medical emergency. In those cases, it’s okay to use your credit card even if you can’t pay it off in full the next month. Pay at least the minimum every month (try to pay a little over) and most importantly, make a plan for how you are going to pay that money off as soon as possible.

That sounds like a good practice to follow. When the hits keep coming, what’s the risk?

Any time you are carrying a balance on your card from month to month you’re taking a risk—credit card companies can change almost any rate or term with little notice. Plus carrying a balance will not help your credit score. But, if you’re facing a true emergency, using your credit card can give you time to get back on your feet without ruining your credit (compared to, for instance, neglecting payments on a home or auto loan).

I’m trying to focus on not getting hurt by interest (too much) and not damaging my credit score. Thanks to some help from mint.com and Google Calendar, I’m pretty on top of paying everything on time, so as long as I’m not at risk of forgetting to make a payment it shouldn’t hurt, right?

Exactly!  What I did was setup auto-pay on my credit card accounts and, a week before it’s due, I can double-check that my auto-payment went through and my balance for that month is paid off.

My fiancée and I have a shared credit card that we use for our joint purchases (like the new bathroom towels, Saturday’s “Let’s have amazing food!” dinner, and any Sharks game we can make) so that we can easily divide our expenditures later (and not have to juggle credit cards at the counter in the moment). Assuming we pay it off every month (or very close) to avoid interest, is there a better way to do this? Is doing this actually hurting our credit?

Assuming you pay the card off every month, you should be fine. There’s nothing wrong with having and using a couple credit cards as long as you have the money to pay them off.

Like the seasoning in a recipe for financial success: “Use in moderation,” right? What else?

One other thing to look at is what percent of your credit limit are you using at any given time. Owing more than 30% of your available credit will actually affect your credit score negatively. So, if your card has a $3,000 credit limit and you regularly have more than $1,000 on the card—that will negatively affect your credit. You want to have low balances, pay bills on time, and pay more than the minimum if you’re going to be regularly using your credit cards.

That said, going over that $1,000 is absolutely okay in emergencies, especially if you can pay that balance off right away (and perhaps pay it back before it’s even due, if you can to get it back under 30% of available credit).

You had some great recommendations for online savings accounts in your previous article. Do you have similar recommendations for credit cards?

If you have carried a balance in the past or think you might carry a balance in the future, look into credit cards that have the lowest APRs. The APR is the annual percentage rate you will pay on the money you don’t pay off in full every month. Typically, this is between 10-25%.

It certainly makes sense to just pay off the remaining balance each month.

If you have consistently paid off your balance every month, focus more on rewards. Most cards give you 1 “point” for every dollar you spend. This is typically equal to 1% back on a purchase ($1 back on $100 purchase). So, look for a cards that will give you more than that amount for certain purchases.

I like the sound of that! But from that word, “certain,” it sounds like there’s a catch?

Let’s say you wanted to get a couple credit cards with different rewards. You could get a Bank America Cash Rewards Card which gives you 2% back on groceries and 3% back on gas purchases. If you eat out a lot, you could get the Chase Sapphire Card which gives you 2% back on dining. Or you could look into the Chase Freedom Card which gives you 5% back on different types of purchases every three months (i.e. movie theatres & gas stations, or Amazon & department stores). Just make sure you know which cards give you what rewards and use them accordingly. (Note: All the above credit cards will give you the standard 1% back on other non-category purchases.)

So, we could use a different card for every kind of purchase, or…

Or, if you don’t want to have to remember what cards give you what rewards, you could get a card that gives you 1.5% back on all your purchases like the Quicksilver Cash Rewards Card.

Regardless of what you’re looking for, use credit card comparison sites to figure out which offers you will use most.

That sounds great but… Should holding multiple credit cards be avoided? It seems like a delicate balance between “You have enough credit history to get a mortgage” and “Your credit isn’t quite good enough for a livable mortgage.”

There’s nothing wrong with holding multiple credit cards so long as you’re not abusing them. I wouldn’t get more than about four, but two or three is totally fine especially if they give you points for different types of purchases.

That sounds like a good rule of thumb. So what’s the recipe for success?

The ideal situation for your credit cards is that you have a few, you keep low balances on them, and you pay them off in full every month. Now—that’s not always possible. But that’s what’s going to get you the best credit score if that’s what you’re looking for.

As a gamer, I always want the best score. I’m curious though. You said “low balances,” not “no balances.” Is not using your credit cards bad, too?

It’s not great to never use your cards. But… it’s probably better to not use your card for a short amount of time than to close the account. It’s awful for your credit if you open and close credit cards any more than you absolutely need to. Say you’ve opened too many credit card accounts, and you realize you really don’t need them all: don’t close them (unless you have a tendency to abuse credit) and don’t stop using them entirely. Just charge one small thing a month to them and then pay that off in full every month.

I feel like this should be taught in school; do you have any homework for me?

Sure! Here’s a good article on how balances affect your credit score.

Now, for those 20-somethings who are lucky enough to be investing and not just borrowing: when the world looks messy (I’m looking at you, Russia) or the market looks testy (well, this isn’t the ’90s, so maybe this isn’t so terrible a threat), is it ever the right decision to pull your stock market funds?

I’m already following your advice on using passive investment strategies in Mutual Funds/Index Funds/ETFs because, seriously, who has time to micromanage this?

It depends on what kind of account your stocks are in.

If your money is in a retirement account where your money is in Mutual Funds/Index Funds/ETFs—don’t move your money. Do not move it. Maybe you think you can time the market and avoid a dip, but even the best brokers fail to do this regularly. Money for retirement has a long time to grow if you’re putting it in before age 30, and even before age 40. It’s much better to ride out the market’s highs and lows if you have the time and your money is invested diversely.

Don’t touch the retirement. Got it! What about all the other types of investments?

If you have a separate brokerage account though that is not for retirement but is, instead, say…. money for that wedding, money for a house, money for a big trip… money that you are planning on needing in a couple years—then, you may possibly want to pull your stock market funds. If you know you will need that money and you don’t have confidence in the market (or you just don’t want to take the chance because you know you will need it soon), it’s okay to take the money out and put it in something less risky (hello, high-yield savings accounts or CDs!). Or, take half your money out and keep half in—another way to be slightly more risk-averse.

Okay, so keep your ultimate money goals in mind when deciding where and when investments should be managed. I feel more fiscally fit already! Thanks, Sara!

Michael Cox is a contributing writer. He is also a really tall computer engineer, app developer, musician, computer gamer, and San Jose Sharks fan. Twitter: @TehMiikay.

Sara Hamling is a contributing writer. Graphic Designer, Foodie and Baseball Enthusiast living in San Francisco and exploring the rest of California. Follow me @shamlingdesign

Photo by Rob Adams

Photo by Rob Adams

Expectations vs. Reality: Living in Sin

“Ooooh, I guess things are gettin’ pretty serious, huh?”

If you are preparing to move in with your sig-o, get ready to hear that every day of your life for the foreseeable future.

But what the heck does that even mean… “Things are gettin’ pretty serious”? In the year 2013, what qualifies as a “serious enough relaysh” that you’d consider moving in together? Only you and your guy/gal can accurately answer that question. It’s different for everybody, so this won’t be a discussion about how to know if it’s the right move. But whether you’re gearing yourself up to put a ring on it or cruising along at a gentler pace, one thing remains constant: living together changes (almost) everything. You might not expect it to, especially if you’ve practically been living together the entire time you’ve been dating. But, as one half of a couple that just took a jaunty stroll down this road, here are a few realities of the situation that might differ a smidge from your expectations.

The actual physical moving of apartments was rather eye-opening for me. I think I’ll start with that. Moving day is about as relaxing as that moment when your best friend just became a zombie, and you must decide whether or not to blow his head off because in about five seconds he’s going to eat your face. Moving is a dangerous dance! It’s likely you’ve never seen your sig-o handle stress of this kind before. Our move went a little something like this: we decided to do it ourselves, with friends and a U-Haul. Except, in the end, only one super-dedicated friend actually stuck with us the whole day, the U-Haul rental place was far away and threw off our whole schedule, and we were not as well-packed as we thought we were. A mattress was thrown off a balcony. Things of a somewhat vile variety were uttered. So… my advice for the big day? Fork over the cash, and hire a moving company. Really. U-Haul often tacks on all kinds of extra fees anyway, so in the end it’s not that much cheaper. If you hire movers, you can focus on the excitement of your first awesome apartment together instead of: “Hey, Liz, please don’t hold that chair like you have 6-inch T-Rex arms, the legs are going to—!”“Uhh, do we have a hot glue gun? The legs of this chair all fell off.”

But if you do decide to DIY, take comfort in this: if your relationship comes out of moving day intact, it can probably survive anything!

Something else I wasn’t quite expecting was the fact that just because we liked each other, it would not necessarily mean we liked each other’s stuff. Once we got through the move and started putting things in their proper places, there were several instances of, “Oh… wait, we’re hanging that? On an actual wall in our actual home?” When we lived in our respective apartments with roommates, we always had our own rooms—spaces that were completely our own. But now, for the first time ever, the entire space was shared space. The solution in this case is simple, but it requires patience. Over time, invest in nice, new things that you both like. If you’re not lucky enough to have your tastes perfectly align, I recommend having a joint “cool new shit” fund. It doesn’t have to cost an arm and a leg, either. Go to the flea market together and get an antique desk or a funky painting (then do as I do, and go home and watch Flea Market Flip for 3 hours and proclaim, with bloated self-confidence, “We could totally make that table, why aren’t we on this show?!”).

Which obviously leads me to this addendum: Definitely try to make some of this stuff if you’re crafty types! In the end, you might have to make a few concessions. But focus on getting new stuff together, instead of stewing over how much you know he/she loathes your antelope-shaped candelabra (yeah, that’s mine).

Also, speaking of joint purchasing ventures: maybe you were expecting the money questions to kind of answer themselves, or that you’d both be impeccable about splitting all household expenses evenly. But you need to chat about it. My philosophy is 50/50, all the way—on everything from the cable bill to groceries, no matter which person the food “belongs” to (so this means, yes, I spend just as much on his ground beef as he does on my veggie burgers and tofu). But definitely have an honest conversation about your finances before you move. If one of you is a little more solvent than the other, that’s okay. Maybe you agree on 70/30 or 60/40. But whatever you decide, have a mathematical layout and stick to it. It’s easy to get sloppy with that kind of thing, but it’s also the thing most couples wind up fighting about!

Another notable change is the sharing of people. Two-Buck-Chuck-Ladies-Night-In will take on a different form. As will five-hour Xbox/Chipotle-scarfing marathons. Your single-social behavior is going to change, which is weird, right? It’s not like either of you were “single” before this. But now, when you have friends over, even if you have the space for each person to operate independently, you may feel it’s necessary to try to include one another. And that’s great! I love when the important people in my life get to know one another better. My heart is easily warmed by everybody getting on like peanut butter and jelly. But I definitely wasn’t expecting this change in the social atmosphere. Now every friend visitation is pre-examined, case-by-case. If my best girlfriend needs to drink half a bottle of wine and give me a very graphic play-by-play of her latest sexcapade, I will suggest a trip to the bar instead of inviting her over, as was our usual M.O. when I was living alone.

This accomplishes two things: firstly, it stops you from inadvertently making your sig-o feel like they’re intruding just because they’re there. Sloppy secondly, it gets you the hell out of the apartment, which leads me to another unexpected possible side effect of co-habitation. “Co-Hermitation,” I like to call it. It happens to pretty much everybody. It’s totally normal. You’re together, so you’re being social even if you’re staying in. It’s a scientific fact. But if you can break the cycle now and then, have at it!

Now, here’s the thing that I think is the biggest expectation-buster of them all. And, a lot of the time, it could be an expectation that other people have imposed upon you because you made this decision. But here’s the thing: moving in together is an enormous sign of commitment. Yes. But there’s a reason you signed a lease instead of a marriage certificate. Living together might be a step in that direction, but if you ask me (which you sort of did because you continued to read up until this point!), moving in with someone you love should be treated as the ultimate personal experiment. You did it because you wanted to be 30000% sure that this is the right person for you, and there are certain things you’ll only understand about your relationship and the “rightness” of it if you’ve lived with this person. That’s what you needed, so that’s what you decided to do. Not everybody needs this “experiment.” Your parents may not have needed it (as they might endlessly point out to you). But this is the 21st century and, more often than not, this is how we roll as adult people who love each other.

However, let it be known that if this experiment does not meet your expectations, if something changes and this relationship no longer makes you happy, living together does not have to mean that you’re in-it-to-win-it for life. Try to make it work. Try and try again, dammit. Not every day is going to be a rollicking honeymoon. But in the end, if it’s just not meant to be, don’t let anyone guilt you into treating it like a divorce. You moved in with this person so you’d know what they’re really all about. And that’s exactly what you came out of it understanding. I SALUTE YOU if this is you presently or if it ever has been you.

Now, I don’t want to leave anyone feeling sad, because who would I be if I did that? Sheesh. So before I sign off, here are a few more hints, practical or otherwise, that you may or may not find useful in your newfound co-habitative bliss:

  • If you have pets, then guess what: your girlfriend/boyfriend also inherited said pets. You may have said things like, “I promise, the dog is mine, you don’t have to clean up after him or feed him or anything, he’s just gonna exist in the house.” But if you all exist in this household together, man and beast, it’s highly likely that that animal will become a greater shared entity than you expected, for better or worse. So, like… definitely make sure the dog isn’t keen on pooping in his/her shoes.
  • If the fact that she throws wet towels on the bed after a shower makes you rage, for the love of God, just tell her! She probably doesn’t even know she’s doing it, okay? Old habits die hard. It’s a hard knock life, living alone. Nobody tells you not to do this kind of stuff!
  • Same goes for cleaning in general. If you have a different definition of the word “clean,” you should probably come to grips with it and find a harmonious happy medium. People like slobs just about as much as they like that OCD 6 am vacuumer.
  • Two TVs or no TV. I’m so serious. One in the bedroom and one in the living room or none at all! I think everybody appreciates what I mean by this!
  • And one more thing, coming at you from the bed where I currently sit, battling a sore throat that I’m convinced is morphing into flu symptoms minute-by-minute: get familiar with each other’s sick day behavior. People usually treat sick people how they want to be treated when they’re ill, whether that’s with 24/7 doting or with a suck-it-up-hands-off approach. As I sit here contemplating whether or not I want to get up and make some honey-lemon tea, I wonder whether or not he knows that I might want somebody to make it for me. Hmmmm.

Stay tuned for next month’s article on how to maximize your sickness sympathy potential (a beginner’s guide).

Moving in w_your sig other square

Photo by Sara Slattery