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How Does Cash Back Work?

How Does Cash Back Work?

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Credit card companies typically offer a plethora of rewards options for their cardholders to take advantage of. But cash back has long been a favorite of many, as it gives you the chance to earn cold, hard money for making everyday purchases. If you’re confused about how cash back works, read on for a full explanation.

How Cash Back Works

At its core, cash back refers to a predetermined percentage of a purchase you make being returned to you as cash rewards. Cash back rates typically range between 1% and 5%, though there are some outliers to be mindful of. Credit card issuers will usually clearly label what types of purchases earn what level of cash back. But like anything in the credit card industry, you must read the fine print.

This is mainly because all purchases and cash back rewards are governed by merchant category codes, or MCCs. Credit card companies ultimately determine these designations, with Mastercard, Visa, American Express and Discover calling the shots. Some common codes are “restaurant,” “department store,” “airline” and “entertainment,” among others. So if you earn 5% bonus cash back at restaurants and you go to Burger King — which has a restaurant MCC — you’ll get that 5% back.

But what these limiting MCCs sometimes don’t take into account are businesses that could fit into more than one category. Included in this group are hotels, superstores like Walmart, tourist attractions like museums and other multi-faceted establishments. In turn, you could lose out on cash back if you’re confused about which category a purchase you made falls into.

As an example, let’s say your family orders room service while on vacation in The Bahamas. You pay with your credit card thinking you’ll get the advertised 3% cash back on dining. When your credit card statement comes in the mail, however, you’ve only received the base 1% earnings. This is because the MCC of your hotel is just that, a hotel, which leaves your credit card issuer blind to what you really bought.

Unfortunately situations like these often offer very little recourse, as your card’s issuer has no ability to change these codes. In fact, only the major credit companies can change their own code selections.

New cardholders will often receive cash back promotions and bonuses. These offers can either be recurring — monthly, quarterly, yearly, etc. — or simply for just one period of time, usually at the beginning of your account’s life. Hypothetically, a recurring bonus might look like this: “Earn 3% cash back at supermarkets and wholesale clubs, up to $1,500 in purchases each quarter.” On the other hand, a one-time promotion might allow for 5% cash back on airfare purchases made during the first three months you’re a cardholder.

Depending on your card, cash back may be capped or it could expire after a period of time. While some cards feature both an earnings limit and expiration dates, others may have no restrictions. All cash back cards have their own, unique system surrounding them. So it’s important to refer to your documentation whenever you have a particular question.

Using Your Cash Back Earnings

How Does Cash Back Work?

The vast majority of cash back credit cards offer variations of the same choices for redeeming rewards. Most often, you’ll see statement credits, checks, bank account deposits, gift cards and charitable donations available to you.

  • Statement credit – Instead of receiving your cash back in-hand, you can apply it to your upcoming monthly bill, saving you money in the process.
  • Check – As one of the more direct ways of redeeming cash back, checks allow you to basically do whatever you want with its value.
  • Bank deposits – Eligible accounts usually include checking accounts, savings accounts or investment accounts.
  • Gift cards – With this option, you can convert cash back into retail credit at a store or website at which you want to shop.
  • Donations – Many card issuers have open relations with charities. These partnerships open the door for you to aid your favorite causes with real money.

It’s by far the easiest to redeem cash back through your card issuer’s website that it provides. Here you’ll not only see your rewards status, you will also know every possible redemption you could make. If you’d rather talk to a real person, most companies still have rewards phone lines you can call, as well.

Those who’d rather not have to worry about where their rewards currently stand will find that a redemption threshold might be helpful. Not all cards offer this feature. But if yours does, set a threshold at which your cash back is automatically redeemed in any manner you desire. Additionally, some cards require you to attain a certain amount of cash back before redeeming is possible.

Cash Back With Each Major Credit Card Company

what is cash back

There are tons of different cash back cards, depending on your credit score you may be eligible for some but not others. While it’s impossible to give universal specifics for each credit card company, below we’ve provided overviews of some of the most popular cash back cards.

Citi Double Cash Card (Mastercard)

Cash Back Rate: 1% at the time of purchase, 1% when you pay them off

Limit or Expiration: No limit; Expires if no eligible purchases are made for 12 months

Redemption Options: As a check, statement credit or gift card

The “double cash” nature of the Citi Double Cash Card means you effectively earn cash back twice: first when you make the initial purchase and again when you pay your credit card bill. The 12-month expiration is fairly standard and the lack of limits on how much cash back you can earn is generous. Statement credits, checks and gift cards are three of the most common redemption choices, so it’s no surprise to see them offered here.

Bank of America® Cash Rewards credit card (Mastercard)

Cash Back Rate: 3% in the category of your choice, 2% on purchases at grocery stores and wholesale clubs, 1% on other purchases

Limit or Expiration: Cash back on choice category, grocery stores and wholesale club purchases is limited on up to $2,500 in combined purchases each quarter; No expiration dates

Redemption Options: Once you have $25 or more, you can redeem as a statement credit, a check or a deposit to an eligible Bank of America® or Merrill Lynch® account

Take note of the combined $2,500 quarterly limit on 3% and 2% cash back in category of choice and at grocery stores and wholesale clubs, respectively. The Bank of America® Cash Rewards credit card also requires cardholders to have a minimum of $25 in earned cash back before they can redeem.

Blue Cash Everyday American Express Card
(American Express)

Cash Back Rate: 3% on U.S. supermarket purchases, 2% on U.S. gas stations and select U.S. department store purchases, 1% on other purchases

Limit or Expiration: 3% rate at U.S. supermarkets is limited to $6,000 a year in purchases then drops to 1%; No expiration dates

Redemption Options: After earning at least $25, redeem as a statement credit in $25 increments; Gift cards and merchandise redemptions from time to time

Amex offers some of the strongest rewards cards around, and the Blue Cash Everyday American Express Card is no exception. It does come with some limits; namely the 3% cash back rate on U.S. grocery store purchases is capped at $6,000 in purchases a year. At that time, cardholders earn 1% in cash back on groceries.

Discover it® Card
(Discover)

Cash Back Rate: 5% in rotating categories like gas station, supermarket, restaurant, Amazon.com and wholesale club purchases, 1% on other purchases; Full cash back match at the end of your first year

Limit or Expiration: $1,500 cap on purchases that earn the 5% rate each quarter; No expiration dates

Redemption Options: Statement credits, deposits to a bank account, gift cards and eCertificates, pay with cash back at select merchants and charitable donations

Discover cards offer great first-year cash back matches and distinctive cash back categories. These traits are on full display with the Discover it® Card. This includes 5% cash back on purchases ranging from dining to Amazon.com. However, there are limits for this rate and you have to opt in to categories each quarter to qualify. This card also offers five redemption options — the most on this list.

Tips to Maximize Cash Back Potential and Minimize Credit Risk

  • Cash back is one of the most prolific perks that the modern credit card market has to offer. But it’s important that you don’t overspend outside of your means just for the sake of rewards. Because many cash back cards come with higher annual percentage rates (APRs), this could force you into large, unsustainable interest payments.
  • Whenever possible, swipe your card for purchases in bonus categories. Not all cards have these to offer, but most do. So make sure you know which cards in your wallet offer bonuses at places like gas stations and supermarkets.
  • Know what types of redemptions — statement credits, bank account deposits, gift cards etc. — work best for you. This will drastically narrow down your card options, making the decision process much simpler.

Photo Credit: ©iStock.com/4×6, Â©iStock.com/Pgiam, Â©iStock.com/Ridofranz

Editorial Note: This content is not provided by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by the issuer.

Advertiser Disclosure: The card offers that appear on this site are from companies from which SmartAsset.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SmartAsset.com does not include all card companies or all card offers available in the marketplace.

The post How Does Cash Back Work? appeared first on SmartAsset Blog.

Source: smartasset.com

What credit card should I get?

One of the questions I’m asked the most is, “Which credit card should I get?”

There’s not a one-size-fits-all answer, but here’s how to narrow it down:

Which credit card to choose if you carry a balance 

If you’re in credit card debt, then you need to prioritize your interest rate over rewards. The average credit card charges 16.05%. It doesn’t make sense to pay interest just to earn 1%, 2% or 3% in cash back or travel points.

If you have credit card debt, forget about rewards for now. You can avoid interest for up to 18 months with the right balance transfer card. And some card issuers (especially credit unions) charge ongoing (non-promotional) rates as low as the 6%-9% range. Don’t chase rewards if you’re revolving a balance.

If you have credit card debt, I recommend these cards:

  • Citi Simplicity® Card*: 18-month 0% intro balance transfer offer; transfers must be completed in the first four months; 3% balance transfer fee ($5 minimum); 0% introductory purchase APR for 18 months; regular variable APR of 14.74%-24.74%
  • Wells Fargo Cash Wise Visa® card: 15-month 0% intro balance transfer offer on qualifying balance transfers; intro balance transfer fee of 3% or $5 (whichever is greater); transfers must be made within 120 days to qualify for intro offer; 0% intro purchase APR for 15 months; regular variable APR of 14.49%-24.99%; regular balance transfer fee of 5% or $5 (whichever is greater)
  • BankAmericard® credit card: 12-billing-cycle 0% intro APR balance transfer offer; must complete the transfer within 60 days of opening the account; 3% or $10 transfer fee, whichever is greater; introductory 0% purchase APR for 12 billing cycles; regular variable APR of 12.99-22.99% on purchases and balance transfers

See related: Balance transfer cards with no transfer fee

Which card to pick if you don’t have any credit card debt 

Now we’re on to the fun stuff! The key questions at this juncture focus on how much effort you want to put in, how you spend your money and what you want to get out of your rewards.

Some people treat credit card rewards like a game. It’s fun for them, and they spend time looking for the best deals and juggling multiple cards. Yet about three-quarters of credit card holders prefer simplicity and would rather use the same card or two as widely as possible, we found in an August 2019 survey.

You won’t get the best rewards with that approach, but you can still do pretty well. Here are my favorite flat-rate cash back cards:

  • Alliant Visa Signature Card: 2.5% cash back on every purchase with a $99 annual fee (waived your first year)
  • Citi® Double Cash Card: Essentially 2% cash back on everything (technically 1% when you buy and 1% when you pay it off); no annual fee

If you make more than $20,000 in credit card charges in a typical year, the Alliant Credit Union Visa Signature is a better bet despite the annual fee.

Which card to pick if you’re willing to put in a little work to earn better rewards 

Dividing your spending among multiple cards is the best way to reap higher returns. At this stage, you need to consider how you spend your money. Different cards incentivize different types of spending (e.g., travel, restaurants, groceries, entertainment).

You also need to think about your desired redemption. Cash back has the broadest appeal (after all, who couldn’t use a little more cash?), although travel rewards are usually the most valuable. Some 49% of U.S. adults have at least one cash back card, 20% have an airline or hotel rewards card and 19% have a general travel rewards card, our research shows.

Chase Sapphire Reserve, the American Express® Gold Card, the Citi Premier® Card and the Capital One Venture Rewards Credit Card).

Each of these issuers has more than a dozen airline and hotel transfer partners, plus you can book an even wider variety of flights and hotels directly through the card companies. These programs provide tons of flexibility, and in terms of cents per point, they generally offer higher returns than cash back cards.

Parting advice

As you can see, picking the right credit card for you is an individual decision. I’ll leave you with two more thoughts:

You’re doing well as long as you’re avoiding credit card debt and redeeming rewards for something that’s valuable to you.

Not everyone wants to fly to the Maldives in first-class and stay in an overwater bungalow. Even if it yields fewer cents per point, a free flight to grandma’s house or cash back on everyday purchases could make more sense for your particular situation.

You should absolutely consider sign-up bonuses when evaluating credit cards, but don’t lose sight of the fact that your credit card strategy should be a long-term pursuit. Especially if you’re new to credit, focus on ongoing value rather than card churning.

* Information about Citi Simplicity has been collected independently by CreditCards.com. The issuers did not provide the details, nor are they responsible for their accuracy.

Source: creditcards.com

Chase Freedom Flex vs. Chase Freedom Unlimited

The Chase Freedom Flex℠, or the Chase Freedom Unlimited®? The card names sound the same, and at a glance the rewards are similar.

Not so fast: Though the cards have a lot in common, there are a few key differences to keep in mind when deciding which is the best fit for you.

Both the Chase Freedom Flex and Chase Freedom Unlimited offer hefty sign-up bonuses, along with bonus cash back on dining and drugstore purchases, as well as travel purchased through Chase Ultimate Rewards. The difference is their rewards structures: The Freedom Flex card offers 5% cash back on rotating quarterly categories, while the Chase Freedom Unlimited offers a flat-rate 1.5% cash back on everything.

Read on to get a rundown on the pros and cons of each card, as well as which card is best suited for you, based on your spending habits.

Chase Freedom Flex versus Chase Freedom Unlimited

Chase Freedom Flex
Chase Freedom Flex℠
Chase Freedom Unlimited
Chase Freedom Unlimited®
Rewards rate
  • 5% rotating quarterly categories (upon enrollment, on up to $1,500 in spending per quarter, then 1%)
  • 5% cash back on travel purchased through Chase Ultimate Rewards
  • 3% cash back on dining
  • 3% cash back on drugstore purchases
  • 1% cash back on other purchases
  • 5% cash back on travel purchased through Chase Ultimate Rewards
  • 3% cash back on dining
  • 3% cash back on drugstore purchases
  • 1.5% cash back on all other purchases
Sign-up bonus $200 if you spend $500 in first 3 months
  • $200 if you spend $500 in first 3 months
Annual fee $0 $0
Estimated yearly rewards value ($1,325 monthly spend, including sign-up bonus) $532 $405
Pros
  • No annual fee
  • High rewards rate on both specific categories year-round and on rotating categories
  • Large sign-up bonus
  • Can transfer rewards to other Chase cards
  • No annual fee
  • High general rewards rate
  • Large sign-up bonus
  • Can transfer rewards to other Chase cards
Cons
  • Requires some maintenance
  • Can be difficult to max out rotating categories (may not always align with spending)
  • Low cash back rate on general purchases
  • Not the highest rate available on general purchases
Who should get this card?
  • Rewards maximizers
  • People who want to collect Ultimate Rewards points
  • People who like cash back variety
  • People who want to earn Ultimate Rewards points without paying an annual fee
  • People who want to keep it simple
  • People who want to earn bonus cash back in both specific categories and general purchases
  • People who want to earn Ultimate Rewards points without paying an annual fee

Chase Freedom Flex overview

The Chase Freedom Flex card offers a combination of year-round and quarterly-rotating bonus cash back categories. Each quarter, you can enroll in a new bonus category from the Chase cash back calendar and earn 5% back on the first $1,500 you spend in that category (then 1% back after you reach the $1,500 threshold). Throughout the year, you’ll also get 5% back on all travel booked through the Chase Ultimate Rewards portal, 3% back on dining and drugstore purchases and 1% back on all other purchases.

Upsides: The opportunity to earn bonus cash back in select categories year-round and in a variety of categories each quarter.

Downsides: The complex rewards program. To get the most out of the card, cardholders must track their spending, since the 5% rate only applies to certain categories that rotate frequently and is limited to $1,500 per quarter.

Furthermore, cardholders must log in to their Chase account and activate their rewards category by the deadline each quarter to earn the 5% rate. For example, to earn 5% cash back during the first quarter of 2021 (on select streaming services, phone, cable and internet services and at wholesale clubs), you must activate the category by March 14, 2021.

Chase 5% cash back calendar 2021

Winter Spring Summer Holiday
January – March April – June July – September October – December
  • Select streaming services
  • Phone, cable and internet services
  • Wholesale clubs
TBA TBA TBA

Chase Freedom Unlimited overview

Like the Freedom Flex, the Freedom Unlimited earns bonus cash back on Ultimate Rewards travel (5% back) and dining and drugstore purchases (3% back). However, instead of rotating cash back categories, the Freedom Unlimited offers 1.5% cash back on general purchases. There’s also no annual fee, and no interest on purchases for 15 months from account opening (after which a variable APR of 14.99% to 23.74% applies). The card is currently offering a $200 bonus for spending $500 in the first three months.

Upsides: The Freedom Unlimited card offers a straightforward rewards program that allows cardholders to earn at least 1.5% on every purchase they make – with no earning caps or rotating categories.

Downsides: Although 1.5% cash back is a substantial amount to earn on general purchases, it’s not the highest rate out there.

trio of Ultimate Rewards cards.

See related: Chase Ultimate Rewards guide: The best ways to earn and use Ultimate Rewards points

*All information about the Chase Sapphire Preferred Card has been collected independently by CreditCards.com and has not been reviewed by the issuer. 

The editorial content below is based solely on the objective assessment of our writers and is not driven by advertising dollars. However, we do receive compensation when you click on links to products from our partners. Learn more about our advertising policy

Source: creditcards.com

From Bankruptcy to Paying $22,000 Cash for a Car

The post From Bankruptcy to Paying $22,000 Cash for a Car appeared first on Penny Pinchin' Mom.

rebounding from bankruptcy

I was recently a guest on the Masters of Money podcast.  One of the statements Phil made was “Wait a minute.  How does one go from declaring bankruptcy to paying $22,000 cash for a car?”

I had never really looked at my journey in that way.  But, when I thought about it, I realized –  “Dang!  That really is pretty awesome.”  And, what is even more interesting is how my bankruptcy was the catalyst for bringing me to the place I am today.


WHERE IT ALL BEGAN

When I was in my 20s, I was in a relationship. To be totally honest, it was destined to fail.  We were just really too different and so it was never going to work out.  However, being young, naive and in love, I was doing all I could to make it work.

For me, that meant buying things to make him happy.  But, truth be told, I was really spending money to make myself happy.  I loved money because it made me feel good.  I adored all it offered to me.

Sadly (and like so many others), it lead me down the path of financial ruin.  Well, not the money itself.  My attitude did.

I had such an adoration of money, and what I thought it was doing for me, that I misused it. I allowed it to take control of my life to try to fill some of the emptiness I was experiencing.

In December 2001, that relationship came to an end.  When it happened, I was devastated. It was a mix of sadness because it was over but honestly, more fear of me being able to support myself alone financially.

I had built up a lot of debt with him. While it was joint debt, we were not married. We both knew that we could not make ends meet alone and that we also needed to find a way to put this all behind us.  So, bankruptcy it was.

That following August, we met in Wichita, Kansas before the bankruptcy judge and it became official. I was bankrupt.

 

REBOUNDING FROM BANKRUPTCY

Fortunately for me, a few months after that relationship ended, I had moved to a new city and met the man I would eventually marry.  In fact, he proposed to me just a week after I declared bankruptcy.  Talk about a keeper!  😉

When I met my husband, I learned a lot about myself and what real love was like. I began to understand that it wasn’t in the things I gave him or he to me, but in the moments we shared. For the first time in my life, I experienced true love and joy.

He was the change I needed.

We married in June 2003 and knew that we wanted to start our family as soon as possible.  One thing we both agreed upon was that we wanted for me to quit my job and stay home with our children.  It was important for both of us that one of us was there to raise them.  We knew it would be a financial challenge, but one we felt we could overcome together.

In September 2004, our first daughter was born.  That was the same day I officially quit my job.

 

HERE COMES THE DEBT (AGAIN)

Once I was staying home with our little girl, our finances changed.  They had to. We could not spend as much money dining out and in other ways as we once did.  We both knew that.   However, we also had purchased a new home and there were things we needed wanted.

A few months before she was born, my husband purchased a pickup.  One month after Emma arrived, we went out and bought a brand new minivan.

Between the vehicles and a home equity loan to buy things for our house, we had accumulated quite a bit of debt.  We just kept juggling the bills and trying to balance it all – and not very successfully.

I started working part-time from home a few hours a week. That meant I was able to be here to take care of my baby, and was also able to bring in a little bit of cash.  It was difficult to do, but I knew we needed the money, so I kept at it.

Our son followed in March 2007.  There was no way I could still try to work the hours they needed for me to, and raise two kids. My kids mattered more.

So, I quit.

We continued getting by.  There were times when we robbed Peter to pay Paul.  We were making it, but not in the way we wanted to.

Then, one evening, my husband told me to go out to dinner with my friends.  Little did I know what would happen next.

 

THE DINNER THAT CHANGED IT ALL

After an evening of dinner and drinks with my girl friends, it was time to pay.  Most of us pulled out a credit or debit card to pay.  However, my son’s Godmother, Kathy, reached into her purse and pulled out an envelope.

I asked her what that was about, as I’d never seen such a thing before.  She explained how they were using cash for everything instead of plastic because they were trying to get out of debt.

That intrigued me, so I asked her more questions.  She told me how she and her husband had recently started to follow Dave Ramsey.  They were able to create a budget and a plan that was helping dig them out of debt.  She filled us in on some of the program and what they were doing.  That left me wanting to learn more.

When I walked through the door that evening, I sat down and started sharing all of this with my husband.  We knew that our friends did not make much more than we did, so we thought “if they can do it – so can we.”

I grabbed my computer and we started researching this Dave Ramsey.  We had no clue who he was or what he taught. The more we read, the more we were inspired to follow his plan.  We pulled out the debit card and made our purchase.  Nope.  We didn’t even sleep on it.

 

HOW WE CREATED OUR DEBT FREE PLAN

Once the Dave Ramsey books and materials arrived in the mail, we were like two kids on Christmas morning. We tore open the box and could not wait until our kids were in bed that night…..so we could read!!!

Within the week, we had started our plan.  Luckily, we had around $2,000 in the bank, so our emergency fund was already taken care of. We created a budget and a debt snowball plan and were ready to attack.

I was looking at the numbers and our plan and it hit me. I was in debt again.  However, this time, I felt as if I had brought my husband along with me.  I felt horrible that I was back in this situation.

Yes, this time around the spending was not for the same reasons as before, but it had happened. Were we going to get out of debt and just do this all over again in a few years? Why would it be different this time? Did I really learn from my past mistakes?

I started giving this a lot of thought and realized that even though the bankruptcy was behind me, my money attitude was still the same.

 

MY (MUCH NEEDED) ATTITUDE CHANGE

When I looked at the money we had spent, I realized that it was because I enjoyed spending it.  It wasn’t because I was trying to replace an emptiness in my life. Heck! I was happier than I had been my entire life.  But yet, here I was, still building debt, buying things I did not really need.

I had to do a lot of self-analysis. It began with me asking myself one simple question:

“What do you feel when you think about money?”

For me, it was simple. I loved it. I loved how I could use it to get things I wanted.  And, not having had much money growing up, I thought I worked hard for this, so I will spend it as see fit.

When I said that out loud to myself, I knew it was not healthy. Money is not here just to get the things I want.  Sure, it is fun to buy items, but those things were never making me happy.  My husband and children were doing that for me.

I took another look at the debt and knew that the money had purchased things.  Those things were replaceable and if I lost them all tomorrow, I’d be OK.  However, my family wasn’t.  There was nothing in this world that could or would ever replace them.  Ever.

In that moment I made the decision that I was no longer going to love money.  I was going to love my family – and myself – more.

For me, it meant changing my entire attitude.  Once that happened, it all started to fall into place.

 

THE PLAN WE USED – THAT WORKED!

As I mentioned above, we read the Dave Ramsey plan.  While we followed most of what he said, we also had to do some of our own research and come up with our own ways to do things.

For my husband, it meant selling some of the guns he owns (he is an avid hunter).  I sold furniture and other items that were taking up space in the basement.  We had garage sales.  Any money we made from these ventures went to our debt.

I started researching and finding ways to save more money at the grocery store.  And, as a result of my findings, some of my on-line friends encouraged me to start a blog.  (And, we all know where that lead now, don’t we.  😉 ).

Through it all, we did it.

On February 10, 2010, we made the final payment on our mini van.  We had done it.  We had become debt free.

 

THE CASH CAR

Once we were out of debt, we were able to start saving money.  It felt amazing to be able to keep more of what we earned and not have to hand it over to everyone else.

My husband and I knew that we would eventually need to replace our mini van. We started paying ourselves monthly payments – instead of a car company.  We built up that savings for many, many years.

When we had enough built up to pay cash for a car, we did not do it.  Even though we had the money to pay for it, we did not really need a new car.  That was a want.

So, we saved even more and researched and waited until the right car came along.  And, it did.  More than 2 years after we had enough money to pay for the car we wanted, we made the purchase.

There is nothing like sitting down at the dealership and writing a check for a vehicle.  There is no worry about how to fit the payment into our budget. The car is ours.  We were able to drive it home and just enjoy it.

The hard work had paid off.

 

YOU CAN TO IT TOO – I PROMISE

During our journey, I found my calling.  It was to help others, just like you, do the same thing we did.  This blog is how I do that.

I have shared many stories, tips and ideas to help you and your family save money over the years. I know some of you have been able to follow my articles and get started on your own debt free journey.

However, reading a few articles here and there can be difficult to follow. My husband and I did that ourselves.  Yes, it worked for us, but we both kept wishing we could follow a plan that would not just give us a few tools on how to do things, but really be there.

Someone who would hold our hand when we were scared. That we would have others to lean for advice.  We wished that we could celebrate our victories with others who really understood and can relate.

That led me to where I am today.  This blog.  This chance to really help others.  And, in those continuing efforts, The Financial Reboot Course was born.

 

CHANGE YOUR ATTITUDE – CHANGE YOUR LIFE

For me, the one change I needed to make was my money attitude.  I did not do that the first time around and I ended up making some of the same mistakes. History was repeating itself.

Once you can do the same thing, and really understand the root of how you feel about money, then – and only then – can you start to overhaul your finances.  If you don’t change the way you handle money, you will be destined to make the same mistakes over and over again.

I want to guide you on your own financial journey. I want you to be successful. I want you to be able to shout it from the rooftops — I’M DEBT FREE!!!!

Let me help you make the change you need at this moment in your life.  Kick start your own Financial Reboot, and leave the past in the past.

 

The post From Bankruptcy to Paying $22,000 Cash for a Car appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

The Risks of Playing The Stock Market

child's hand playing chess

To the uninitiated, the stock exchange can seem like a casino, with news and social media feeds sharing stories of investors striking it rich by playing the stock market. But while there are winners, there are also losers—those who lose money playing the market, sometimes pulling their money out of the market because they’re afraid of the potential of losing money.

Playing the stock market does come with investment risks. For new investors learning how to play the stock market can be a frustrating, humbling, and in some cases, incredibly rewarding experience.

While investing is a serious business, playing the stock market does have an element of fun to it. Investors who do their research and tune into the news and business cycles can take advantage of trends that might better enable them to earn good returns on investment.

This is what you need to know about how to play the stock market, the risks involved, and what makes the market so alluring.

Playing the Stock Market: What Does it Mean?

Despite the phrase “playing” the stock market, it’s important to make the distinction between investing and gambling up front.

safe investment—in a way each investment can feel like a gamble. However, it’s important to keep in mind that the market is not a casino, and just because there’s risk involved doesn’t mean that “playing the market” is the same as playing roulette.

So what does “playing the stock market” actually mean? In short, it means that someone has gained access to and is actively participating in the markets. That may mean purchasing shares of a hot new IPO, or buying a stock simply because Warren Buffett did. “Playing,” in this sense, means that someone is investing money in stocks.

Playing the Market: Risks and Rewards

Learning how to play the stock market—in other words, become a good investor—takes time and patience. It’s good to know what, exactly, the market could throw at you, and that means knowing the basics of the risks and rewards of playing the market.

Potential Risks

In a broad sense, the most obvious risk of playing the market is that an investor will lose their investment. But on a more granular level, investors face a number of different types of risks, especially when it comes to stocks. These include market risk, liquidity risk, and business risks, which can manifest in a variety of ways in the real world.

A disappointing earnings report can crater a stock’s value, for instance. Or a national emergency, like a viral pandemic, can affect the market at large, causing an investor’s portfolio to deflate. Investors are also at the mercy of inflation—and stagflation, too.

For some investors, there’s also the risk of playing a bit too safe—that is, they’re not taking enough risk with their investing decisions, and as such, miss out on potential gains.

Potential Rewards

Risks reap rewards, as the old trope goes. And generally speaking, the more risk one assumes, the bigger the potential for rewards—though there is no guarantee. But playing the market with a sound strategy and proper risk mitigation tends to earn investors money over time.

Investors can earn returns in a couple of different ways:

•  By seeing the value of their investment increase. The value of individual stocks rise and fall depending on a multitude of factors, but the market overall tends to rise over time, and has fully recovered from every single downturn it’s ever experienced.
•  By earning dividend income. Dividends can also be reinvested, in order to further grow your investments.
•  By leaving their money in the market. It’s worth mentioning that the longer an investor keeps their money in the market, the bigger the potential rewards of investing are.

How to Play the Stock Market Wisely

Nobody wants to start investing only to lose money or otherwise see their portfolio’s value fall right off the bat. Here are a few tips regarding how to play the stock market, that can help reduce risk:

Invest for the Long-term

The market tends to go up with time, and has recovered from every previous dip and drop. For investors, that means that simply keeping their money in the market is a solid strategy to mitigate the risks of short-term market drops. (That’s not to say that the market couldn’t experience a catastrophic fall at some point in the future and never recover. But it is to say: History is on the investors’ side.)

Consider: If an investor buys stocks today, and the market falls tomorrow, they risk losing a portion of their investment by selling it at the decreased price. But if the investor commits to a buy-and-hold strategy—they don’t sell the investment in the short-term, and instead wait for its value to recover—they effectively mitigate the risks of short-term market dips.

Do Your Research

It’s always smart for an investor to do their homework and evaluate a stock before they buy. While a gambler can’t use any data or analysis to predict what a slot machine is going to do on the next pull of the lever, investors can look at a company’s performance and reports to try and get a sense of how strong (or weak) a potential investment could be.

Understanding stock performance can be an intensive process. Some investors can find themselves elbow-deep in technical analysis, poring over charts and graphs to predict a stock’s next moves. But many investors are looking to merely do their due diligence by trying to make sure that a company is profitable, has a plan to remain profitable, and that its shares could increase in value over time.

Diversify

Diversification basically means that an investor isn’t putting all of their eggs into one basket.

For example, they might not want their portfolio to comprise only two airline stocks, because if something were to happen that stalls air travel around the world, their portfolio would likely be heavily affected. But if they instead invested in five different stocks across a number of different industries, their portfolio might still take a hit if air travel plummets, but not nearly as severely as if its holdings were concentrated in the travel sector.

Use Dollar-cost Averaging

Dollar-cost averaging can also be a wise strategy. Essentially, it means making a series of small investments over time, rather than one lump-sum investment. Since an investor is now buying at a number of different price points (some may be high, some low), the average purchase price smooths out potential risks from price swings.

Conversely, an investor that buys at a single price-point will have their performance tied to that single price.

The Takeaway

While playing the market may be thrilling—and potentially lucrative—it is risky. But investors who have done their homework and who are entering the market with a sound strategy can blunt those risks to a degree.

By researching stocks ahead of time, and employing risk-reducing strategies like dollar-cost averaging and diversification when building a portfolio, an investor is more likely to be effective at mitigating risk.

With SoFi Invest®, members can devise their own investing strategy, and play the market how they want, when they want. Whether you’re interested in short-term trading or have your eyes on a longer-term prize, SoFi Invest is a way to dip your toes into the stock market and start investing today.

Find out how to get started playing the stock market with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOIN20287

The post The Risks of Playing The Stock Market appeared first on SoFi.

Source: sofi.com

The Half Payment Budget Method Explained

The post The Half Payment Budget Method Explained appeared first on Penny Pinchin' Mom.

The half payment budget method might be what you need.  If traditional budgets do not work, you really might want to consider this method instead.

 

half payment budget method

 

If you do any research, you will find many ways to budget.  However, many times, the options you find do not work for you.  That is why it is important to find the right budget for your needs.  A new one you may not have tried is the the half-payment budget method.

This system helps many people stop living paycheck to paycheck.  Simply explained, it is where you take your regular, recurring payments and divide them in half.  Each payday, you set aside the necessary money out of each check so that you have the full payment available when it is due.  The half payment is not paid at that time, but rather you hang onto it and pay it on the due date.

If you are just learning about budgeting, you will want to check out our page — How to Budget. There, you will learn everything you want to know about budgets and budgeting.

HOW TO USE THE HALF-PAYMENT BUDGET METHOD

In order to explain this in a simple manner, here is how this system might look for you:

Monthly income: $2,500 (paid $1,250 every other week)

Recurring monthly payments (other than utilities):

Mortgage/Rent: $900
Vehicle Payments: $450
Auto insurance: $100

When you apply the half-payment method, your weekly budget would look something like this:

Paycheck #1 – $1,250

Set aside $450 for rent/mortgage
Set aside $225 for vehicle payments
Set aside $50 for insurance

Leaves $525 out of your paycheck for other expenses

Paycheck #2 – $1,250

Take $450 from previous paycheck and add $450 and pay $900
Take $225 from previous paycheck and add $225 and make full $450 payment
Take $50 from previous paycheck and add $50 to make $100 payment

Leaves $525 out of your paycheck for other expenses from each check

 

Now, let’s compare this to the method that many use – to just pay when the bill is due:

Paycheck #1 – $1,250  

Rent – $900

Leaves $350 for all expenses

Paycheck #2 – $1,250

Vehicle payments – $450
Insurance – $100

Leaves $700 for additional expenses

If you do the math, you will notice that you still have the same to spend over the course of a month, however, you will see a difference in the amount from each paycheck.  You might show that you have more money left after your 2nd paycheck of the month, but will you really save that?  Most people do not. If they have extra month to spend, they just spend it.

 

How to Start

I would not recommend that you jump in and change all of your bills so that they are paid using this method.  That may be too much and you might quit before you even really get started!  Instead, select one bill, such as a car payment, and try using the half payment method for a few months.  Once you see it works, you can transition other bills into this same payment method.

 

Why it Works

So, why would you use the half payment method?  For many it works better because you have around the same income to spend out of every check, rather than cutting your spending in half like you see in the second example.  For many, there is always that paycheck that makes spending tough.  When you have to pay a few larger bills all out of one check, it often leaves little to no money left for other purchases.

By changing to the half method, you are still paying your bills, but you are just earmarking money to pay a bill due later in the month.  You still have the same income.  You still pay your bills on time. However, you have more disposable income every two weeks by doing it in this way.

What is great about this method is that it works no matter how you are paid.  If you are paid monthly or weekly you might try using a quarter payment method every week (breaking out your check to leave spending weekly).

 

If you want to learn more about understanding your money attitude, change your spending habits and get out of debt once and for all, check out the Financial Rebook eBook.

The post The Half Payment Budget Method Explained appeared first on Penny Pinchin' Mom.

Source: pennypinchinmom.com

What Investors Should Know About Spread

coffee and phone on pastel mobile

When trading stocks, there are several market terms that are helpful to understand, such as portfolio, dividend, and volatility. Another key term to know is spread.

In simple terms, a spread represents the difference between any two financial metrics. The type of spread depends on the type of security that’s being traded. For example, when trading bonds, the spread can refer to a difference in yields between bonds of varying maturity lengths or quality.

But there are many differences between bonds vs. stocks—and spread is one of them. With stocks, spread refers to differences in price. Specifically, it measures the gap between the bid price and the ask price. Understanding what is spread and how it works can help you more effectively shape your investment strategy.

What Is Spread?

buying a home. As a home buyer, you may have a set price that you’re willing to pay for a property, based on what you can afford and what you’ve been pre-approved for by your mortgage lender.

You search for homes and eventually find one that has everything on your wishlist. When you check the listing price, you see that the seller has it priced $10,000 above your budget. In terms of spread, the maximum amount you’re willing to offer for the home represents the bid price, while the seller’s listing price represents the ask.

What Does Spread Mean?

Aside from stock spread, spread can have a variety of applications and meanings in the financial world.

As mentioned earlier, bond spread typically refers to differences in yield. But if you’re trading futures, the spread can measure the gap between buy and sell positions for a particular commodity. With options trading, it can refer to differences in strike prices when placing call or put options.

Spread can also be used in foreign currency markets or forex (foreign exchange market) trades to represent the difference between the costs for traders and the profits realized by dealers.

With lending, spread is tied to a difference in interest rates. Specifically, it means the difference between a benchmark rate, such as the prime rate, and the rate that’s actually charged to a borrower. So for example, if you’re getting a mortgage there might be a 2% spread, meaning your rate is 2% higher than the benchmark rate.

Bid-Ask Price and Stocks Spread

If you trade stocks online, it’s important to understand how the bid-ask price spread works and how it can affect your investment outcomes. Since spread can help gauge supply and demand for a particular stock, investors can use that information to make informed decisions about trades and increase the odds of getting the best possible price.

Limit orders. This is an order to buy or sell a security at a certain price or better.
•  Stop orders. A stop order, also called a stop-loss order, is an order to buy or sell a security once it hits a certain price. This is called the stop price and once that price is reached, the order is executed.
•  Buy stop orders. Buy stop orders are used to execute buy orders only when the market reaches a certain stop price.
•  Sell stop orders. A sell stop order is the opposite of a buy stop order. Sell stop orders are executed when the stop price falls below the current market price of a security.

Stop orders can help with limiting losses in your investment portfolio if you’re trading based on bid-ask price spreads. Knowing how to coordinate various types of orders together with stock spreads can help with getting the best possible price as you make trades.

The Takeaway

The more investing terms an investor is familiar with, the better able they’ll be to invest with confidence. Spread is a term that means different things in different situations, but when it comes to stocks, spread is the difference between the bid price and ask price of a given stock. Being able to assess what a spread might mean can help inform individual trading decisions.

As you learn more about stocks, including what is spread and how it works, you can use that knowledge to create a portfolio that reflects your financial needs and goals.

SoFi Invest® makes it easy to get started with stock trading and investing. Members can choose which stocks to buy or sell, based on their investment objectives and risk tolerance, and purchase shares in some of the market’s biggest companies through fractional share investing with Stock Bits.

Find out how SoFi Invest can help you reach your financial goals.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Stock Bits
Stock Bits is a brand name of the fractional trading program offered by SoFi Securities LLC. When making a fractional trade, you are granting SoFi Securities discretion to determine the time and price of the trade. Fractional trades will be executed in our next trading window, which may be several hours or days after placing an order. The execution price may be higher or lower than it was at the time the order was placed.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIN20258

The post What Investors Should Know About Spread appeared first on SoFi.

Source: sofi.com

8 Tips to Save Money on Meat

January 27, 2021

TipstoSaveMoneyonMeat

Buy It in the Morning

Looking for deals on meat? Hit up the supermarket in the early morning. That’s when they’ll be restocking the meat case, and you’ll have the best bet at finding a deal.

Buy in Bulk

Ask at the deli counter of your supermarket for “bulk ends,” and ask if there’s a discount! These end bits of sliced meats are too small to slice in the machine, but can be sliced or cubed at home. They’re often offered at half off!

Befriend the Butcher

When does your supermarket mark-down meat? It’s as easy as asking the butcher. Especially if you’re friendly, he or she will usually be happy to let you know this valuable savings secret.

Market Watch

Supermarkets have started using their own wording on meat packages to make you think that the product you are buying is a better grade than it really is. Most of the major chains are buying more select-grade beef, but may call it by any number of fancy names such as “top premium beef,” “prime quality cut,” “select choice,” “market choice,” or “premium cut.” Be aware that these titles don’t actually mean anything!

Ask for Discounted Cuts

Grocery stores make a lot of money on meat, so it’s not surprising that they display the priciest cuts in the case! Experience dramatic savings by instead asking the butcher to slice different cuts for you from the same primal (or section) of the cow or pig. These cuts can be as little as one-fifth the cost of the expensive, pre-packaged cuts, and they’ll be just as tender and tasty. Here are a few discounted (yet delicious) cuts you can ask for: Instead of buying ground beef, ask the butcher to grind up a bottom round roast for you. If you’re looking for rib eye steak, request chuck eye. (You may need to ask the butcher to cut a 4-inch roast off the front of the boneless chuck, then to peel out the chuck eye and cut it into steaks.) Instead of pork tenderloin, buy an entire loin roast and ask the butcher to cut it up for you.

Buy Bigger Hams

If you’re going to buy a canned ham, purchase the largest one you can afford. Most smaller canned hams are made from bits and pieces glued together with gelatin. Cured hams are injected with a solution of brine salts, sugar, and nitrites. The weight of the ham will increase with the injection, and if the total weight goes up by 8 percent, the label will usually say “ham with natural juices.” If the weight of the ham increases by more than 10 percent, the label must read “water added.”

Make Your Own Patties

Never buy meat that’s already been shaped into patties (unless it’s on sale). Instead, buy your own and shape into patties yourself. Place a sheet of waxed paper between each, then place the entire stack in a resealable plastic bag and put in the freezer.

Leaner Isn’t Always Better

Even if you want to prepare low-fat meals, you don’t always need to buy the leanest (and most expensive) ground beef. If you’re preparing hamburgers on a grill or on a broiler rack, most of the fat will be lost during the cooking process, so stick with the moderately lean varieties.

For more ways to save money from all over the internet, check out our Saving Money board on Pinterest. And don’t forget to sign up for our newsletter and follow us on Facebook for daily tips!

Photo courtesy of Shutterstock.

Source: quickanddirtytips.com

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