LRN got hacked this morning. Thankfully, I backup weekly and subscribe to my own RSS feed. 20 minutes to total restoration.
Credit Card Glossary
As evil as credit cards are, most adults have one. Have you ever wondered what percentage of those people know the details of[ad name=”inlineright”] their credit card agreement, or even what all of the terms mean?
Here’s a quick list of the terms and their definitions.
- Average daily balance – This is the balance most card companies use to calculate your interest. They add the balance each day and divide it by the number of days in the billing cycle. This number times the interest rate is (roughly) the interest you have to pay.
- Annual Percentage Rate(APR) – This is the interest rate expressed as the interest accrued in one year. The actual calculation is much more complicated.
- Balance transfer – If you’ve ever paid your VISA with your Mastercard, you’ve done a balance transfer. These often have a great introductory rate and a lousy permanent rate.
- Cardholder agreement – This is the contract that defines all of the terms of your card: interest, default consequences, payment terms, and everything else. You should never sign for a card without reading and understanding this document.
- Charge-back – If you dispute a charge on your card, the issuer may issue a charge-back, and take the money back from the merchant to return to you.
- Credit line – This is the amount you are able to charge. You should fear this number and stay as far away from it as possible.
- Default – When you stop paying your card, you become delinquent. If it goes on too long, you will be in default. Read: screwed. This is when they crank your interest rate to the sky and cut your limit to match your balance. It’s also the point that affects your credit rating.
- Due date – This is the day which, if you miss it, will cause you to acquire an extra $15-39 fee for the privilege of misreading your calendar. Always pay your bill before this date.
- Finance charge – This is the actual interest accrued for the billing period. This is money you are paying for the privilege of borrowing the rest of the money. Next month, you’ll pay a finance charge on this money, too. Yay!
- Grace period – For most cards worth owning, you get 20-25 days before the issuer starts charging interest. The best way to manage your card is to pay it off completely twice a month. That way, you’ll never use up your grace period and never pay a cent of interest.
- Introductory rate – Many cards will offer a crazy-low interest rate for six months to lure you in…like crack. They’ll get you hooked, then raise the rate and force you to charge new toys at the higher rate. Ideally, you’ll never carry a balance, so you’ll never have to worry about the introductory rate.
- Minimum payment – If debt has an evil heart, this is it. If you pay nothing but the minimum required payment, you will be in debt for the rest of your life. Always pay more, even if it’s just an extra $20.
- Over-the-limit fee – If you ignore your credit limit and keep spending, you’ll get hit with another $15-39 fee for the privilege of not controlling your irresponsible impulses.
- Periodic rate – This is your APR expressed in relation to a specific time frame, usually as a daily periodic rate. For example, if your interest rate is 18%, your daily periodic rate is 18/365 or 0.0493%
- Pre-approved – When you get a pre-approved card, you are actually just getting a notice that you have been pre-screened as not being too much of a deadbeat for that particular card. You will still have a full credit check before the card is issued.
- Secured card – If you’ve got lousy credit, sometimes your only choice to repair it is to get a prepaid card. You give the company $200 and they will let you charge $200. They are almost always loaded with fees and are usually a very bad deal, but if it’s the only game in town…?
- Universal default – Sometimes, if you default on one card, every other card you have decides to gang up on you, because your “risk profile” has changed. Yet more proof of the evil that is credit-card debt.
- Variable interest rate – Some card tie your rate to the Prime interest rate, so when that changes, your rate does, too.
Did I miss any terms?
2012: The Year the World Ended
December 21st marks the day that Mayan calendar-makers decided was far longer than they needed to waste their time carving
days into stone.
More importantly, it marks the beginning of the week before my birthday. No self-respecting civilization would end the world just a week before my birthday.
This is traditionally the time that people look back at the previous year, and make resolutions they don’t intend to keep in the following year.
Who am I to buck tradition?
In 2011, I became a bit of a workaholic.
This site has taken off a bit. I’m not about to retire off of the proceeds, but it has turned into a nice little side income. Thank you for that.
I launched a marketing company. We do web design/development, social media work, and search engine marketing. It’s strictly a part-time gig right now, but it’s growing and taking up most of my free evenings and weekends.
I’ve been working 50-60 hours a week at my day job.
The plus side? I’ve also paid off almost $20,000 of my debt in 2011, bringing my total to $47,535 left.
It’s been a lot of work, but the harder I hustle, the sooner I can stop hustling.
What’s in store for 2012?
On the work front, I plan to cut my weekly load down to 40-45 hours again. Life it to short to work all of the time.
I want to expand my new company to the point that my day job is optional. I’m projecting that by spring. Call it June 1st.
Here, I want to double the size of my audience. I don’t just want random people popping in, I want to grow an engaged audience. That means more comments and more discussion. Expect to see more along those lines.
I’ve also got a couple of products under development. By year-end, I’d like to have them both released.
On a personal level, my biggest goal is to carve out a regular chunk of time to spend with my wife. Working all of the time has cut into our quality time together. I want to find a way to schedule date nights at least twice a month. It will cost more money, but that’s part of why I’m working so much.
Financially, I want to kill the last of my credit card debt. That’s down to about $17,000. We’ll need to keep working at it, but it’s a reachable goal. That means we still don’t get cable, I still avoid buying books every week, and my kids still have to live with not getting every whim fulfilled.
To recap: I’m going to work smarter, grow my side projects, and make this site better for you. In the process, I’m going to kill the last of my unsecured debt, and drag my mortgage down to it’s last gasping breaths.
Here’s to the end of the world….
4 Ways to Change Your Finances for the Better
Finance is made out to be difficult, but it’s really not. All financial advice really boils down to 2 sentences: “Spend less than you earn. Save or invest the rest.” Everything else is an unnecessary complication, unless you need to be told that commemorative plates aren’t actually an investment. Unfortunately, we’re all people. (Except for you in the back. I see you, and you are not people.) People make mistakes. People sometimes need things spelled out, or at least explained in a way that makes it seem less intimidating to get started.
With that in mind, here are four steps that will get you out of debt and, over a long enough timeline, make you rich:
1. Lower your interest rates. If you’ve got debt, particularly credit card debt, you’re paying too much interest. It doesn’t matter what the interest rate is, it could be better. It’s time to pick up the phone and politely ask your credit card company to lower your interest rate. If they refuse, mention that their competitor is offering you 3% interest on a balance transfer with no transfer fee. Mention a competitor by name, but don’t worry about a specific offer. There are always offers being tossed about.
If they won’t lower your rate, find a company who will. 5% on a 10,000 balance is $500 per year. That’s 3 months of payments for free.
2. Lower your monthly payments. Do you have a cable bill? A phone bill? Any other bills? Put them in a stack and call them. Every. Single. One. Ask if there is any way you can lower your bill. Can you get put on a new customer promotion? My electric company offers a saver switch for my air conditioner that will lower my bill by 15% just for giving them the ability to toggle my AC on and off. When we had that installed, I never noticed it in use.
3. Save $1000. When you’ve got no money, every unexpected expense is an emergency. When you’ve got a little bit socked away, you can ride out the problems without much worry. $1000 may not be enough to ride out an extended bout of unemployment, but it does a pretty good job of taking the sting out of car repairs. Do whatever you have to do, but get some money in an emergency fund. Then, don’t touch it!
4. Categorize wants and needs. I want a vacation. My kid needs braces. I want a big screen TV. My gas bill needs to get paid. I want a new car. My family needs food. Are you sensing a theme? Pay attention to what you spend. Ask yourself if it’s something you need, or just something you really, really want. Just the act of categorizing it can make it easier to avoid buying whatever it is.
5. Use the savings from 1-4 to pay off whatever you owe. Don’t blow your new-found savings on spinner rims or soap made from rich-people tallow. Use it to finally get ahead of the game.
Insurance
On Tuesday, a potential customer took my business partner and I out for sushi.
The sushi bar was fun. There was a little canal going around the bar. The canal had little boats. The boats had little plates. The plates had sushi. Lots and lots of sushi. When you wanted something, you just reached out and took it.
Yum.
My only complaint with the place is the width of the chairs. If you’re going to use narrow chairs, you really shouldn’t choose chairs with armrests.
Between the narrow chairs, the armrests, and my fat butt, my cell phone got knocked off of my belt.
Crap.
I normally check my money clip, car keys, pocket knife, and cell phone every time I stand up, but didn’t this time.
I noticed it was missing 15 miles later.
Of course, when I called, no one answered my phone.
The restaurant hadn’t seen my phone.
When we went back to retrace our steps, my phone was nowhere to be found. Some busboy got a nice tip that night.
Now, I don’t carry insurance on my cell phone. I still have every cell phone I’ve ever owned, in working condition. Well, minus one, now. At $5/month, that has saved me more than $1000 over the years.
Of course, it’s a bit painful this week.
Thankfully, I sock a bit of money away every month to cover things that break. It’s my warranty fund. That, combined with a good(hopefully) find on eBay, means that losing my phone, while irritating, isn’t going to break my budget. It won’t actually touch my budget in any way.
On a side note, a parking ramp with a flat, “all night” charge and a lost ticket fee makes me angry.
Breaking Bad: The Economics of Meth
In AMC’s “Breaking Bad,” Walter White plays the role of chemistry teacher turned meth producer and drug kingpin. While it certainly makes for good television to think about the profits available to someone willing to trade in illegal drugs, the mountain of money that Walter makes by the end of the series is actually not that unrealistic. Meth has a street value that approaches $30,000 dollars per pound. Not only that, but Walter displays a deceptively keen business acumen, especially for a chemistry teacher. A number of keen decisions allowed Walter White to become as successful as he has.
Production Costs
As any business owner knows, merchandise costs are a major portion of any operating budget. Mr. White keeps his profit margins robust in a number of ways. The first of these is by managing his production costs. When he started out in the business, Walter simply stole the majority of the required chemicals from the high school where he worked. This allowed for the product to be sold at a substantial profit when compared to producers who are required to invest more upfront.
Location, Location, Location
On top of his discounted production, Walter was able to stay ahead of the competition both literally and figuratively by utilizing his RV for production. Typically, meth is produced in a laboratory environment, which requires a building. This adds an additional cost of rent to the typical business profile. Walter, on the other hand, produced out of his RV in the early stages of his business’ growth, further increasing his profit margin.
Distribution
On the production side of the economy, a major consideration is distribution costs. While most of Walter’s competition used pricey, established lines of distribution for their products, he cut out the middle man by distributing his product with his team. This caused major disruptions to his business when his competitors tried to kill him. However, while he was able to accomplish this model, Walter was the beneficiary of increased profits. Then, when he killed his competition, he was able to return to the healthy margin he enjoyed previously.
Advertising
Many new products are launched with a full blown media campaign. This is a costly proposition. Walter, instead, relied on the quality of his product to speak for itself. This competitive advantage reduced the need for an extensive advertising budget. Furthermore, after a period of time, his product became a preferred choice by consumers everywhere. While he was required to distribute a few loss leaders at times, Walter kept the advertising costs down and profited greatly.
So, while it may seem like Walter White was simply a chemistry teacher who got lucky, it’s clear that he actually had a specific plan for his upstart business. By following a few standard economic principles, he was able to increase his margins at the crucial beginning phase of his business, and had established himself as a leader in the market when he chose to expand
