Cash or Credit?

I have discovered that I'm one of those people for whom cash just burns a hole in my pocket. I limit myself to taking a specific amount of cash out of the ATM each month. I can spend it on whatever I want, but when it's gone, it's gone. For the most part, it tends to go to the occasional caffeine fix during the afternoon, splitting dinner and drinks with friends, things like that. (Of course, during farmer's market season, I take out more cash, deduct that amount from the grocery budget, and buy all sorts of fresh, delicious food.)

I am one of those people who does much better with budgeting if I use a credit card. Number one, I use only one credit card, even though I have multiple. It is an Amazon.com Visa by Chase. I love the rewards, and since I pay it off every month, the higher interest rate does not bother me. (I am working to better utilize my Discover Card though, and take advantage of their 5% cash back opportunities.) I am much less likely to pull out my credit card for a quick $2.00 purchase, where as plunking down that amount of cash is a quick process.

I've also found there's something to having to transfer that big chunk of money to the credit card company every month - yes, I could automate it, but having to type it in and watch it transfer makes it sink in a bit more.

Part of the problem might be that I don't track my cash expenditures. Maybe if I tracked it, I would be less likely to spend at random, but each time I tried that, I ended up without receipts, and forgot what I had purchased. It was a failed experiment. The new experiment is to always budget the same amount of cash every month. So if next month, I start the month with $20 in my wallet, well, I can take out $20 less from the ATM, and rebudget that saved $20 into another budget category, like an additional $20 to my clothing or book fund. For the most part, looking at it that way has helped.

It seems that among personal finance bloggers, there is a debate over whether it is better to go to an all cash system or to completely avoid cash and use credit or debit cards. After reading all the opinions, I don't think there is a right answer. I think it depends on a number of factors, and everyone should do what works best for them. Which is why I'm sticking to mainly credit card transactions.

Spending too much... and yet not...

Yesterday, I went on a bit of a spending binge. At least, I definitely felt like I was going out and being "bad" with my finances. I haven't been shopping for non-necessities since early January, and I have definitely been feeling the pinch. I have a list of things that I want/need to buy when the money comes available (a new cover for my iPod, as the old one has a huge rip in it, a good thermos to bring coffee to work, etc). But I've been waiting.

Really, I blame spring for what happened yesterday. I woke up and it was nice out. Really nice. (Ok, so it was humid and then rained, but it was warm at least.) I realized that perhaps the sweater I wanted to wear to work was not so weather appropriate. I also realized that I don't have a lot of warm weather work clothes.

I decided, therefore, to go shopping at lunch. I'm lucky in that I work in an area with a number of stores within walking distance. I knew that I really didn't have much of a clothing budget this month, but I felt I needed to buy something to start fleshing out my spring and summer wardrobe.

I ended up coming back after lunch having been to buy clothing, and then to the sporting goods store and also Bed, Bath, and Beyond. No, those last two aren't places to buy work clothes. And I was feeling like I had really blown the budget. What did I buy?
A very nice knit top in a style that I wear often
A new knee brace for running, something I've been looking at for a while
A new soap dish for my shower, since the old one fell and broke last week

A "major" shopping spree, and I came back with things that I needed. Well, I didn't absolutely need the shirt, but it was not unneeded either. What about the budget? After plugging the expenses into YNAB, I ended up a total of $30 over in a few categories. I've already made an extra $18 selling books on half.com, which means I'm $12 over budget. Not bad at all, especially knowing that I intentionally overbudgeted in certain areas.

Of course, this can't happen all the time, but it made me realize that I can't keep my budget as incredibly strict as I have been. I can splurge a little bit from time to time, as long as I'm careful to not go overboard.

I think that too many times, we create budgets for ourselves and try to hold ourselves to incredibly strict financial rules. While it is important to save for the future and make smart choices, we also need to reward those decisions in the here and now as well.

You got back how much?

In today's Express, there is a little blurb that states that 47 million tax returns have been filed so far this year, 38 million of them filed electronically. The shocking part of the blurb? The average refund was $2708! That is an amazing amount of money to be overpaying in taxes. Of course, I'm sure the refunds are in large part due to various deductions, but I was delighted to find out that I was getting nearly $500 back (to counter the nearly $800 I paid to two states).


I know that a lot of people like the idea of a refund, but personally, I'd rather have to pay the government at tax time. Ideally, I'd break even (which I feel I got very close to this year). But I would prefer to have the money when I earned it to do with it what I want, rather than get it back later and have given the government that large of an interest free loan.


Just my opinion though, and I know there are strong proponents of large refunds. I bet it is fun to find that amount direct deposited in your account one morning.

Studying what you love

Growing up, my parents always told me this: "We don't care what you decide you want to be, but you have to go to college. If you want to herd sheep, well, then you will be a college educated shepherd."

(My standard response was that I wanted to be a ninja. To this day, I still think it would be a fun profession.)

I didn't really know what I wanted to do with my life when I went to college. I liked my literature classes in high school, and I loved music, but I wasn't sure that I wanted to be a music teacher. An English teacher didn't sound so bad though. So I entered college as an English major, planning on entering the education program my second year.

One semester in the education program told me that while I might still want to be a teacher, I did not want to go through the education program offered to me. I was, for the most part, enjoying my English classes, so I decided to continue there. I changed direction a bit and picked up a supplementary major in a computer field, intending to go to a consulting firm like Arthur Anderson.

Well, we all know what happened there.

So I was coming up on graduation. I looked at what I liked to do. I loved my literature classes. I loved to read and analyze and write. And I liked history and government. A light bulb appeared above my head, and I decided to go to law school. So that I wasn't just jumping into graduate school without any idea of what I was doing, I took a year and worked in a law firm. I learned that while I did not so much enjoy toxic tort litigation, I liked the law. So off to law school it was.

I sometimes wonder what I was thinking, majoring in English. I did what everyone said - I majored in what I loved. Our running joke used to be "If you study engineering, you become an Engineer. If you study architecture, you become an architect. What are you if you study English? Unemployed." Things worked out for me though. I enjoyed what I learned in school, and I enjoy what I do now. My fellow English majors ended up in all sorts of professions: education, theater, government, journalism, and many others.

Sure, with the exception of my supplemental major, I really graduated with no marketable skills. I could read, analyze, and write, but I feel those skills are grossly undervalued by business. But I had followed my passion, and even though my career has taken a total left turn from where I thought I was going when I was 18 and entering college, I have no regrets. I still think that majoring in what you love is a valuable recommendation. You just need to also think about what you will do with your education when you finish, and maybe that means picking up a second major (I have a number of friends who were business and anthropology double majors, for example), or maybe that means graduate school. But you shouldn't abandon what you love. You should work to turn that into what you will do with your life after graduation.

Carnival #142

This week's Carnival of Personal Finance is being hosted by The Baglady, and my post about the Federal Reserve is included. I very much like that The Baglady chose to highlight the myths and facts about the homeless in her post.

The following are some of my favorite posts from this week's Carnival:

• Musings on UltraRunning and Finances - As a short distance runner, I'm very impressed by UltraRunners, and I like the link between finances and UltraRunning
• Why do people hate the word "Budget?" - I love budgets!
• Hunkering Down Financially - With the market as it is, this is never a bad plan. Don't completely hide out, just watch what you're doing
• Working Backwards: What's an Exchange Traded Fund? - There are words we hear tossed around in the financial world, but we might not really know what they mean.
• Dave Ramsey's Baby Steps - I have to admit, I've never read any of Dave Ramsey's books, but I think he does have good advice.
  

Finding a Charity

In a recent Wise Bread entry, there is a link to Think Before You Pink, a site discussing the number of companies who have linked up with the Susan G. Komen Foundation and now advertise that $X from your purchase will go to supporting breast cancer research. I freely admit that in my cabinet right now there are at least two cans of soup with a little pink ribbon on them. Of course, it's soup I really like.

There are so many charities out there, and so many of them are very worthwhile. But it's hard to figure out which ones are good and which ones are not quite as great. Throughout the year, I check out charities on Charity Navigator. This is a site listing a number of charities with background data and rankings of each one. They evaluate charities and provide you with the information you need to decide if that charity is right for you. And if you decide that it isn't, you can search for another charity supporting that cause with a better ranking.

Charities are rated by looking at their organizational efficiency and their organizational capacity. This shows you how the charity uses its money and how it is growing in programs and services over time, two very important questions when you're thinking of donating. The site also tells you the salaries of notable executives on the board of the charity. While I believe these people do deserve a good salary, there are limits.

Digging out of debt and really don't have the money to put towards a charity? I'm not going to argue with you. But you might want to check out GoodSearch. It's a search engine powered by Yahoo. Choose a charity on the front page, and then every search you do, the charity receives 50% of the ad revenue from that search. Sure, it might be only a penny. But as we all know, pennies add up. You can even add a search bar to IE or add GoodSearch to your search box in Firefox.

February Net Worth Update (-0.69%)

Another drop in my net worth this month. Down 0.69%. I suppose that's not a huge drop, but it's movement in the wrong direction. I look at the numbers and just shrug. There's not a lot I could do about it. The loss is mostly due to the downward movement in the market. In terms of cash accounts, the decrease was very small, and the fact that I already paid my state taxes but haven't received my federal income tax return was part of the reason I wasn't in the black. So I can take faith in the fact that my spending is under control.

It is interesting to see the variety in how my investments are playing out. Two of my mutual funds dropped by a small percentage, but one plummeted by almost 3%! My TSP (Thrift Savings Plan - the government version of the 401(k)) is doing ok. My Roth IRA is still down over $400 since I opened it last fall. I should start putting money into that while the market is down.

On the other hand, the six shares of Yahoo that I've had since the late 90's did quite well this month, with all the talk of a buy-out. Those are the only individual shares of stock I own. Years ago, I had a Geocities website, and when they went public, a number of us got 10 shares of Geocities stock. They were bought out by Yahoo, and I ended up with 6 shares of Yahoo stock as well as a check for what I believe was about $300. Since then, I've just let the stock play. I got it for free, and I've already gotten $300 from it. For now, I'm just letting it ride.

One of my 2008 goals is to increase my net worth by 20%. So far for 2008, my net worth has dropped 2.65%. I still think it's possible to come back from that though. I'll just keep plugging along.