About My Credit Card Debt
Newer readers may be alarmed by my high levels of credit card debt. In short, I’m borrowing money for free and keeping it in safe investments while earning me 5-6% interest. Along with other things, this helps me earn extra side income of thousands of dollars a year. Recently I wrote up a series of step-by-step posts on how I do this. Please check it out if you are curious.
Commentary
- The stock market apparently went up this month, again confounding many experts and increased our IRA balances. I continued my monthly contributions towards buying FSTMX within my Self-Employed 401(k).
- I moved $1,050 into my Zecco brokerage account and made a few free experimental ETF trades. I’ll share the details in the 2nd part of my Zecco review.
- Another good month of controlled spending gets us to $66,520 of non-retirement funds, reaching 67% of our midterm goal of house down payment. Total cash is now $56,025.
- Two things that helped boost our savings were the $350 from Vegas gambling winnings and $520 from optimizing credit card cashback on my Citi Drivers Edge MasterCard. 😀
You can see all my previous net worth updates here. Looking ahead to future expenses, we need to start looking into moving companies.
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You are very clever. It still worries me to borrow money than invest it, it just feels scary and complicated.
In your efforts to shop for a house, have you ventured into house marketing and selling ideas?
You want the house you are buying to be sellable. Therefore it might benefit you to put on your sales cap and invision yourself selling a house.
I have a vested interest in asking, we are selling our house and looking for some marketing tips. And since I regularly read your blog and know how clever you are I want your input.
i thought you didn’t have a child. You can open up a 529 w/o a kid?
Elizabeth –
I sold my condo in Oakland (CA) in November with multiple offers, after it was on the market for less than a week. My realtor is a superb marketer and after i renovated the condo she decided to YouTube a virtual walkthrough of the condo…check it out: http://www.youtube.com/watch?v=G0QFMqurAk0.
The buyer actually bought it without stepping foot into the place! I think virtual marketing can work for you as long as you combine it with favorable pricing (put yourself in your buyer’s shoes here) and lost of exposure.
I was fortunate in that i had some flexibility in pricing it, and i actually listed it at a price that was lower than what i wanted to sell it for, hoping to generate enough traffic to bid up the ask price. The strategy worked, but that was six months ago. Still, with the current market conditions, your best bet is to make the house look as warm and inviting as you can and then expose it in as many outlets as you can — especially on free sites like Craigslist and YouTube. Good luck Elizabeth…if you’d like more tips from me reply to this comment and i’ll leave another response including my email.
Jonathan –
Is the 529 for your unborn child(ren)? If so, how does that work…if not, then for whom?
Thank you Phoenix!! Awesome idea!
Phoenix,
If you have any more ideas for me I will be checking back, again thanks for the ideas, I can get on the youtube idea pretty fast, and I just got myself listed on craigs.
Yes, you can open up a 529 without a child, simply set yourself as a beneficiary. There are a bunch of reasons I have a 529, all a bit non-traditional.
– I have a rewards credit card that gives 2% cashback of all purchases directly into the 529. It is no longer available to new customers, I think it only gives 1.5% now.
– I used the 529 to pay my own tuition, in order to take advantage of the tax breaks given to me by my state. Also, I get to spend the credit card rebates
– I had a few 529s with different beneficiaries for some sign-up bonuses over the past few years (for example, open a 529 with $100, get $100 bonus). I recently merged all these together.
– Now that I am done paying tuition (yay!), I’m just going to let whatever is left stay there and grow and compound away for my future kids. You can change beneficiaries at any time as long as they are related to you.
A YouTube walkthrough is a VERY cool idea. As a buyer, I would love it. I’m tired of these lame pictures that come with MLS listings.
I like coverdell better than 529. can you do the same thing w/ coverdell?
Well, I don’t make any contributions to the 529 besides the money from the credit card, and they can’t send to a Coverdell.
When we actually DO have a kid, we’ll probably open a Coverdell in case we need to pay for private schooling or something.
Elizabeth –
Feel free to shoot me an email to PJ.Sinclair@sbcglobal.net and i’ll get back to you this evening with some more selling ideas.
Smurfett –
Coverdell is nice but i think the biggest drawback compared to the 529s are the beneficiary transfer limitations. It’s nice to know that 15 years from now, if your current 529 benificiary doesn’t need the money, you can move it to another benificiary.
I think the Coverdell works best for people who like to “maintain control” of their investments (of course whether owning stocks/bonds/mutual funds means that you’re in control of your investments is debatable).
Hey Jonnathan.
Love your site. Whenever i visit it, I get motivated to do somthing about my personal finanace (some of the times I followed this motivation with concrete actions).
One question which has perpetually haunted me. How do I get my wife to be interested in money matters / common financial goals etc. She hates these personal finance discussions and always steer the conversation to something else whenever I want to discuss financial goals with her. I love my wife, but cannot seem to get her interested in this goal.
Jonnathan, other readers – Any suggestions??
Hey Jonathan,
I have noticed your average monthly net worth gains are trending upward – Awesome! How do you account for this? Have you started working again or is this additional blog revenue or some other income perhaps?
Good job with the cash fund! I can’t wait to see you deal with the maze that is home-buying.
A quick question about your individual 401K… Who are you going through and do you hire someone to do payroll or do you compute it yourself? I recently set up an individual 401K and am having a heck of a time figuring out the deferrals and taxes for my first deposit. I’m using Quicken, but have not signed up for payroll opting to save the money and do it myself.
Great job! I wish I am financially stable as you are.
Maury –
I’d suggest you find a bookkeeper/tax preparer QUICKLY to handle any taxes you need (you might try looking up craigslist or even Quickbooks online has a list of Quickbooks certified ProAdvisor bookkeepers to help you out). Tax penalties on payroll taxes are steep and (if the tax deposits/returns aren’t correct or timely) they could easily end up costing you much more than what you’d pay an accountant to do them right.
You can find a local QB ProAdvisor at: http://intuitmarket.intuit.com/QBA/ReferralDB/ReferralDataBaseMemberSearch.asp#
what kind of car do you drive and what do you recomend?
As 2million asked, did you complete your original 2007 goal to find a job (i assume full-time with your graduate and undergrad degrees)? I calculated ~$5411.33 average monthly liquid income in 2007. Of course that’s good; but, will it be comfortable for you if all your cash liquid disappeared into down payment and related expenses?
Yes, I agree that with a 5 percent return you will make more on borrowing the credit card funds than the fees charged. However, when I crunch out the figures on the latest offer I got which has a fee capped at $99 and charges 1.99 percent APR vs. the 5 percent APR on my savings, I still end up losing money due what I then have to declare on income taxes at year end as interest.
The net result is a negative number vs. the fees I paid to the credit card company. I don’t see how this “borrowing” thing works for a profit.
Do you make to with just one car? Meaning your wife drives and you go to school/work from home? We always needed to keep two vehicles because of two different jobs (commute), and one involved heavy travel, so this was not something we could skimp on. I agree that car is always an expense that you should try to minimize, but for many people having one $5000 vehicle is not an option.
Also, do you think there will be changes to your saving pattern once you buy a house? We have our own place for two years now, and on track to pay it off in 13 years (we have a 30 yr mortgage but pay extra so we could be done in 15), and although we do well with saving, we cannot boast 43% of after-tax income (or was your figure % of gross). Part of the reason is that owning is more expensive, and with accelerated mortgage payment more of our money goes towards equity each month. Because of this, we can’t boast quite the growth you have in your cash savings.
Also, I was curious on your views regarding the 401k/Roth/Brokerage/Cash contributions once the housing question is settled (don’t need to accumulate money for downpayment) and some cushion is built in (several months of monthly expenses saved). We will get to maxing out both 401K and Roth at some point, but for now we are not there yet, and so a question remains as to where our savings should be directed. For now we do max out Roth and put 10-15% to 401K, plus continue a small cash buildup. Any suggestions?
thanks for a great blog, and some of the best ideas on managing finances on the web!
We have two cars, I just list one of them on this asset list for legacy reasons – I did not have it when starting this blog. I keep track of depreciation, but I may just get rid of it one month. It doesn’t matter either way really, it’s just a simple matter of accounting.
As always, I’m not saying what we do is the “right” way or the ideal way to do things. Everyone has different needs. Please don’t consider this to be boasting.
Regarding the 401k issue – I like the idea of maxing out the Roth and the 401ks if you already have the emergency fund and house. Why not?
Jonathan,
If I can ask without intruding into your personal life too much…….(is that possible on this blog? LOL)……..I was curious how you’re able to stash so much cash away each month.
Maybe if you can break down your “Cash Savings” column a bit more??
I mean, if I can save $1000 in a month after the mortgage, bills, IRA’s, extra in mortage, etc. etc. I’m pretty flippin’ proud of myself.
$3K, $4K extra each month is just INSANE to me. How do you do it??
Will you be correcting your net worth for inflation as time passes? (shudder)