Let’s face it.  Credit cards are here to stay.  More and more of us are using less and less cash each day.  Hell, even the parking meters downtown take plastic now.  And don’t tell me you don’t roll your eyes and impatiently tap your foot when someone dares pull out a checkbook!  WHAAAT?!

Photo by james.rintamaki on Flickr

So, it got me thinking.  What would the ideal credit card be like?  What features could actually help us impulsive spenders and negligent savers better manage our money?  Here are some must-have features to create the most awesomeness credit card (yet to be invented).

Photo by http://www.flickr.com/photos/paalia/

1.  Allow you to set limits on spending categories BEFORE you spend it.

Most money-management software allows you to set GOALS for spending in various categories.  But with horrible money managers like us who find ourselves in debt, we simply see those goals defeated at the end of each month.  After a while, the goals don’t really mean anything.  But, imagine a card where you could limit a category BEFORE you spend it.  Say you want to spend $100 a month on entertainment.  When you reach that amount your credit card would be denied, or it would allow the charge but assess you a fee – that went to a CHARITY you’ve chosen and not a bank.

2.  Use social networking to praise (and embarrass you) on your money management skills.

So, our new card allows us to set goals before we spend money.  Now, when you reach a goal each month, your card automatically shares that triumph with your friends.  A “I stayed under my entertainment budget this month!” would post to your wall.  However, when you go over them, it also shares that dirty secret.  Instead you’d see something like, “I just blew my clothing budget this month!  Next time you see me, tell me if it was worth it.”

3.  Interact with you as you go through the month to help you reach your goals.

Your new card would talk you and keep you automatically updated on your goals.  After you just went through the checkout at the grocery store, you’d get a text message updating you on your grocery goal and warn you if you were spending too much.  “Did you really need that bag of chips?” it would ask.  “You only have $35.82 left in your grocery budget this month.”

Photo by http://www.flickr.com/photos/menetekel/

Unfortunately, many of my ideas aren’t new.  They were originally thought up by Dan Ariely in his book Predictably Irrational published in 2008!  He presented his ideas for a more perfect credit card similar to what I just listed to a big bank.  They istened politely to his proposal and did nothing about it.

Now, MasterCard has a service called inControl™ that does just that.  After a Google search on it, I found a press release from August 2010 that Citibank was going to begin providing the service in late 2010.  A quick look on the Citibank website didn’t mention anything about the service.  I guess they realized that if consumers actually limited their spending, they’d be set up to lose a ton of money.  More recently Citizens Financial Group has said they intend to use inControl…but for business customers only in order to allow them to monitor and control the spending of their employees.  Looks again like business looking out for business and consumers losing out once again.  They say they will expand the service to all customers later in the year, but we’ll see if they live up to that.

Photo by http://www.flickr.com/photos/alancleaver/

What can you do now to have a more consumer friendly credit card?

Getting gifts cards for yourself and using them for your purchases is one way to limit your spending.  However, the fees on those can get pricey.  A better bet is a new card by my friends at SmartyPig.com (I love these guys!) which allows you to reload a card from your SmartyPig account or your bank account.  There is no fee to transfer money or to use the card other than a first time activation fee (which all the other gift cards have, too).

Another thing is to search out there for consumer friendly banks – as an eternal optimist I have to believe that they exist out there somewhere.  Also, avoid banks that charge you any kind of monthly fee on your accounts.

The technology is out there to make our credit card dreams a reality.  Let’s hope that banks see past dollar signs soon enough to help us all out.

What would your ideal credit card be like?

Do “nice” banks really exist?

One of the most popular New Year’s Resolutions (including mine) is about paying off debt.  Cutting out expenses is one way to reach your goal, but another way is to have more money coming in.  With two kids and a government job, a pay raise and a part-time job are out of the question for me, but I recently heard about virtual freelancing as a way for people to earn some extra dough in the comfort of their own home.

http://www.flickr.com/photos/yourdon/

There are several sites out there which cater to those of us looking for some extra cash without having to actually go out and get a second job somewhere.  It’s also a good option for someone in between jobs as a way to keep up your skills and fill your resume.

The premise for the sites is basically the same: There are categories for the different types of jobs, you generate a profile showcasing your experience, and then you bid or apply for jobs you find interesting.  It’s fun to just read through the different people applying for jobs.  One admin assistant job had people from the U.S., Indonesia, and Pakistan send in bids.  We truly are a global economy now!

Here’s a brief rundown on some of the most popular virtual freelancing sites.

Elance.com

• Free or paid memberships.  A paid membership gets you access to more clients and job postings.
• Paid by the hour by using screenshots to document your work; or paid by reaching certain agreed upon deadlines.
• Paid through Pay Pal, wire transfer, or automatic deposit into your bank account.

Guru.com

• Free or paid membership that allows you to bid on more jobs each month.
• Able to request a payment upfront that is held in an account until your work is completed.
• Paid through direct deposit, PayPal, pre-paid Mastercard, wire transfer, and check.

Vworker.com

• Free membership with unlimited monthly bid proposals.
• Guaranteed payment.
• Paid by PayPal, check, wire transfer.

Freelancer.com

• Large variety of jobs.
• Free and paid membership which reduces your commission fee and allows you more bids.
• Paid using PayPal, wire transfer, Moneybookers, and Freelancer.com debit card.

oDesk.com

• Free membership.
• Free skills tests to help prove your skills to employers.
• Health insurance option if you work 30+ hours/week.
• Daily job alert emails.

Have you ever done any virtual freelancing?

What other ideas do you have for brining in some extra cash?

Flickr by niseag03

Last year I made some pretty bold New Year’s Resolutions to not buy any clothes, shoes, or purses for the entire year, and not to use my credit cards.  How’d I do?  With the exception of some new clothes for my trip to Europe and some new shoes for work, that was it.  Also, while I was in Europe I used my credit card.  I justified those purchases since it was an all-expense paid trip, and I wanted to bring some souvenirs back with me.

I discovered that last year my resolutions did curb my impulse to buy things for ME, but I also noticed that I bought more clothes, toys, and shoes for my kids.  This year my financial resolution needs to be bigger and more purposeful.

My 2011 New Year Resolution:

I will pay off $14,239.65 in credit card debt in 2011.

This is half of the total amount that we owe, and it’s going to mean coming up with an additional $670 a month over the minimum payments so some serious financial belt-tightening will be in store, but it’s possible. Since accountability helps drive my goals, I’ll be sharing my progress on the site–so wish me luck!

What are your big New Year’s Resolutions?

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Now that Thanksgiving has left our tummies full, Christmas season and the holiday shopping that goes with it is officially here to leave our wallets empty.  Hopefully while you all out there shopping local businesses, you are also sticking to your budget.  Here are some steps to keep your wallet in check this holiday season.

Four steps to keep a fat wallet this holiday season:

Step 1: Write down the names of everyone on your list

photo by Susan Averello on Flickr

Before you even start hitting the stores, you need to have a plan.  Be sure to include EVERYONE – spouses, brothers, sisters, kids, in-laws, grandparents, parents, co-workers, caregivers, “adopted” families, etc.  Wrack your brain until you make sure that you’ve gotten everyone down.

Step 2: Determine how much you want to spend on each person.

Go down your list and assign each person a dollar amount.  If you’ve already bought something for someone SUBTRACT it from the amount you plan on spending.  You are trying to create a budget going forward so you know how much you can spend on each person.  Total the list so you know how much you plan to spend on all your holiday shopping.

Step 3: Look at you monthly budget to reallocate money for your holiday gifts.

Now that you have the total amount you intend to spend, you need to figure out where it’s going to come from.  If you’ve been saving up for the past few months for your shopping, then good for you this step will be easy.  If you haven’t, then this is the month you cut out restaurants, slash your grocery bills, eliminate entertainment, and squeeze every available penny so you can spend that money on your gifts and not get into debt.

Step 4: Look at layaway.

Andreas Schaefer from Flickr

Layaway is making a comeback, so if you can’t squeeze enough out of your monthly budget, this is a good option for you.  Sears, TJ Maxx, and Toys R Us are just some of the national chains that offer layaway, but you can still find local stores willing to offer this old-school service such as Kaleidoscope Toys in Round Rock.

Final Thoughts

Just remember to keep the gift giving all in perspective.  I mean, do you even remember what you got last year?  Stick with your budget so you don’t end up paying for this year’s holiday gifts next year.

How do you budget for holiday shopping?

Do you believe less is more when it comes to holiday gifts?

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Sometimes we get lucky and some extra money comes our way.  Maybe it’s a just a bonus at work or a gift from a family member.  Wherever it comes from, it’s a good idea to stop and think about the best way to use this money.  The biggest thing to remember is that it’s a WINDFALL – a one-time thing – so don’t spend it frivolously or use it to make an upgrade on your standard of living.  Unfortunately, this is what lottery winners do and also why so many of them are broke.

Flickr - quinn.anya

My windfall came with the sad news of my grandmother’s death.  It wasn’t a ton of money – like those lottery winners – just a few thousand dollars.  However, it was enough to be tempted, given my shopoholic past.  I had to make sure that this money was spent in a way that didn’t betray my financial goals.  Here are a few guidelines to follow:

Pay off Debt

If you are paying high interest rates on your credit cards, then you should definitely use the money to pay them down.  I used a portion of my windfall to pay off my evil American Express card.  Woo hoo!

You should also think about paying off any other personal debt – car loans or other personal loans.  However, you may want to hold off on putting the money toward your mortgage, especially if you have a low interest rate.

Flickr - alancleaver_2000

Fund that emergency fund

The second thing you should do with the money is to fund your emergency fund – 3 months income is ideal.  This step is crucial so that you don’t end up back in credit card hell should something happen such as major car or home repairs or medical bills.

Save for retirement

If you still have some of your windfall left, you next need to fully fund your retirement accounts.  This means maxing out your 401k contributions and making your maximum annual contribution to your Roth IRA, which this year is $5000.

Wait, what about my kids?

A lot of people want to use the money to start an education fund for you kids.  Why this may sound like a noble thing to do, you have to make sure YOUR retirement (not to mention your present situation) is secure first.  Your kids will have loans and grants available for them to go to school.  You won’t have this for your retirement.  Also, whatever money they have as assets can cause them to not qualify for additional loans since their assets are included in their loan applications.

These are just a few suggestions to help you make the best use out of your windfall.

Check out this article for more tips.

What would you do with your windfall?

What other tips can you share?

The newest trend in saving money is evident in the rise in the number of online coupon sites: Groupon, Eversave, Living Social, and Localiter–just to name a few.  This past week I analyzed each site’s offers each day to figure out which one was the best.  Here’s a round-up of deals for the week of September 13 – 19.

Groupon

Monday – 50% off Mad Cakes

Tuesday  – 50% off Brazlilan Blowout at Cristina’s Hair Designs

Wednesday – 50% off food at Apothecary

Thursday – 51% off membership to Mexic-Arte Museum

Friday – 67% off dermatology services at eOs med spa

Saturday – 55% off exterior power wash from Texas Painting Company

Sunday – 67% off Wine Insiders online store

My Thoughts

• Good variety of goods and services offered this week
• I enjoyed the witty writing that accompanied each deal
• Except for Sunday’s offering, all local companies

Eversave

Monday – 50% off Life Cafe

Tuesday- 60% off Brow Wax at Blue Lotus

Wednesday – 50% off Adventure kayak or bicycle tour from Gliding Revolution

Thursday – 66% off round of golf at Hyatt Regency’s Lost Pines Resort

Friday – 50% off unlimited boot camp classes at Fitness for Mind and Body

Saturday – 50% off Arthur Murray dance lessons

Sunday – 50% off Pro Soccer tickets

My thoughts

• Visually, not as appealing as the others.
• Offers “bonus saves” which were actually deals to be offered later in the week
• This week was heavy with “activites” – golf, boot camp, dancing, soccer ticket

Living Social

Monday – 2 for $24 at Texas Sphere Ride

Tuesday – $60 Chemical Peel from Austin Dermatology Associates

Wednesday – 50% off house cleaning from Aroma-Chic

Thursday – $30 for unlimited yoga at Yoga Plus

Friday – $70 for two jet ski rentals from Just for Fun

Saturday – $50 for four airbrush tans from Aruba Tan

Sunday – $14 for oil change at Arbor Autoworks

My Thoughts

• Good variety of services offered
• No food or drink offers
• I enjoyed the witty writing that was with each offer

Localiter

Monday – 50% off Izzoz Tacos

Tuesday – $30 for Microderm abbrasion and brow and lip wax at Amy’s Skin Care

Wednesday – 50% off Guitar lesson from Charlotte Adams

Thursday – $60 for one month of High Heel Boot Camp at Tusa Fitness

Friday – 50% off Lovely Austin boutique

My Thoughts

• Love, love, love the fact that ALL the coupon sites could be found on one page!
• It’s a local company
• Good mixture of food, services, and goods
• No deals offered on Saturday and Sunday, buy you could still buy Friday’s deal

Overall, I was impressed by the availability of local business that each site offered and the variety of deals.  With the exception of the weekend offerings, they were all local businesses.  I also found it interesting that practically each day had a “theme.”  I’m curious to see if that’s a weekly thing.

Austin’s Best Coupon Site?

So, which coupon site was my favorite? Localiter!  The ability to see all the deals for each site, coupled with the variety they offered at their own site, made it a winner.  And, any site that brags, “Founded in Austin,” on its home page has to get some love.

[UPDATE: You might try Dealize, a site by an Austin-based company that aggregates all the coupon sites! Thanks, Jeremiah Newton, for the tip!]

What’s your favorite coupon site?

Which coupon page do you think offers the best deals in Austin?

It seems that there is a lot of talk about credit scores lately.  In the past, it’s almost been like this was some magic number only known by credit report agencies, and you weren’t allowed to be let in on this secret.  But now, there are dozens of websites out there where you can get your credit score.  Some require you to submit a credit card and others charge a fee.  Don’t ever pay for this information since there are free sites out there.  I use Credit Karma because you don’t have to submit any credit card information, it’s free, and it’s simple to use and navigate.

Sample report from Credit Karma

The first time I got my credit score, I was pleasantly surprised to see that it was in the very good rating.  Woo hoo!  For a recovering compulsive spender, I was happy to see that my out-of-control spending habits had not damaged my credit.  In the time that has passed since that first report,  I was forced to cancel three credit cards (due to interest rate hikes), had a ding on my credit due to Wells Fargo student loan not applying my payments corrected, and had my credit line decreased due to this error.

So, when I checked my score after all this had happened I was justifiably upset to see that my score had dropped by 61 points!  WTF!  Here I was living more responsibly, not using my credit cards anymore, trying to get a better control of my debt, and I was being rewarded for my effort with a lower credit score?

Sample report from Credit Karma

What happened?  What actions caused the most damage?  According to Credit Karma these are the various factors that they look at that caused my score to drop:

Open Card Utilization

By canceling three cards, I had reduced my access to open lines of credit so the credit agencies now see me as a riskier client since it looks like I have used up most of my available credit.

Percent of On-Time Payments

Since Wells Fargo wasn’t applying my student loans payments correctly, they reported my loans as being in default.  Since it seemed that I was someone who couldn’t pay their bills, I got a lower credit score

Average Age of Open Credit Lines

The cards I was forced to cancel were all of my more established credit lines.  Most of these cards had been open for ten or more years.  The average age of my cards is now five years which to credit card companies can indicate that I have a short credit history.

My most recent credit score shows it up 22 points from the low a couple of months ago.  Scores seem fluid – going up and down depending on your use of credit.  I’m trying not to get myself too worked up over my recent plunge from Very Good to Good since I’m not in any need for a big loan right now – house or car.  But, it’s good to know what sort of actions can potentially have an effect for when I do need to apply for that loan since your credit score can not only affect access to credit but also your interest rate.

Have you ever checked your credit score?

What surprised you about your score?

Every analysis of my spending habits reveals the same weakness – eating out.  Lately my husband and I have been spending an average of $300 a month on eating out.  To be honest, that’s probably a low estimate–and we do have two kids.  But, to me, eating out is one of those easy drips in the cash flow to plug.  I’ve tried vowing to cook meals  for a month, and that lasted a full two days until a friend of mine invited me out to go out to eat.  So I’m going to give myself a gift card this month to see if that can reign in my eating out spending.

To find gift cards, I took a trip to the grocery store. There were cards for restaurants, home repair shops, toy stores, music stores, and coffee houses–but I just wanted the plain Visa or American Express ones.

After finding them, I had to decide how much I wanted to give myself and determine if I wanted to get a few cards  and give myself a new one each week or  just buy one to last me the entire month.  After looking on the back and seeing that each card had a $3.95 to $5.95 activation fee depending on the amount, I decided to get one $100 card to get me through the month.

How will I use the gift card?

My plan for this card is to use it for all non-grocery store food or drink items for myself or my kids.  When my husband and I go out to eat together, we can split the meal (he has a gift card this month, too) or maybe he’ll decide to treat me!  Ah, the romance! Grocery items, gas for our cars, and other purchases will still be paid for with our bank debit card.

Why not just use cash?

You may be wondering why we just don’t use cash for the month.  I’ve tried that before, and when the cash runs out, I just go back to my debit card.  I’m hoping that since I’ll still be using my typical method of purchasing things (my debit card) my brain will be more receptive to the idea of liming myself.  Being on a budget is all about tricking your brain, right?

So let’s see if using a card will help trick my brain into spending less money on dining out. I’ll let you guys know if it works!

What do you think about using gift cards to stick with your budget?

What are some other ways you trick your brain into saving money?

At our last meeting with our financial planner, I learned about this idea of a financial pyramid.  Starting at the bottom, your financial life should consist of:

1. Emergency cash reserves of 3-6 months expenses.  This money should be in checking accounts, saving accounts, or money market accounts that you have easy access to when you need it.

2.  Longer term savings, safe investments, and 401k contributions.

3.  Insurance.  I learned that you should have enough life insurance to allow your family to operate as normally as possible for the next year or longer if something should happen to one of you.

Upper levels of the pyramid consist of stocks, mutual funds, real estate, and more riskier investments.  See the diagram below for the full description.

Financial Pyramid, adapted from MetLIfe, Inc.

You shouldn’t move up the pyramid until you have a solid base.  Carol, our financial planner, told us that our pyramid was upside down.  Every month we were putting money into a stock mutual fund when that money would be better served building an emergency fund.  She also told us to combine my rollover IRA and Roth IRA into one to avoid the fees that we’re paying on both of them.  I’ll have some tax liability, but it’s worth it considering how little is in each of them.

I’m a person that likes to have clear steps to follow so this idea of a financial pyramid is right up my alley.  We made the changes Carol recommended, and I’m more convinced than ever that financial freedom is in our future.

How would you rate the base of your pyramid?

How do you think this pyramid can help you reach your financial goals?

Today marks my one year anniversary at Republic of Austin.  It’s been a great year, and I couldn’t have gotten this far without the support of you all.  I started last year with over $37,000 in credit card debt.  It’s been a tough year as we adjusted to student loan payments and an additional childcare bill, but somehow we managed to pay off $4656, even with those added expenses!

I decided it would be fun to create a word cloud of all my posts from last year to see what I focused on.  Obviously money, credit, and debt were huge!  I’m a little embarrassed that “clothes” was so prominent, but not surprised considering that’s my weakness.  I was happy to see family, kids, and husband well represented since that’s what this journey is all about.  It’s also about life and freedom.  I’m going to print this out to keep me focused this next year.

Word Cloud of my posts from Wordle.net

I’d also like to focus on topics that you would be interested in reading about. So let us know:

What are some financial topics you’d like me to write about?

What are some of your big financial questions?