Credit Cards are NOT Evil!

Dave Ramsey has the most popular personal finance radio show in the country. He offers a lot of good basic financial advice.

However, I don't agree with him on everything. One of the things he rants against every day is the use of credit cards. He says that no one should use them, ever.

Well, he's wrong. He often mis-represents a study that concluded that most people who use credit cards spend more money than they would if using cash. While it's true that MOST people tend to spend more using credit cards, Ramsey uses the conclusions of the study to claim that ALL people behave this way, which is simply incorrect. You just have to be more responsible than MOST people.

Those with discipline don't treat cash or credit card purchase any differently. They realize that credit cards are a nothing more than a tool. Like any tool that we use in daily life, if it is misused the consequences can be disastrous. Cars, guns, fatty foods, and credit cards can all lead to disaster if misused, that doesn't mean that no one should ever use them.

I contend that responsible use of credit cards is not only a useful convenience, but can also be mildly profitable and help you reach your financial goals.

A couple of rules for credit card use:

1. NEVER CARRY A BALANCE. I can't stress this strongly enough. If I told you to take a $20 bill out of your wallet and set fire to it, you wouldn't do it, but people routinely pay $20 and a lot more in credit card interest. Whether you set a match to your money or pay credit card interest, the money is simply wasted. Pay your balance in full every month, without fail. These days, owning a credit card should cost you nothing, because you can pay your bill online (saves the cost of a stamp).

2. Never pay a fee. I don't care if it's an annual fee or some other fee the bank dreams up- there is no need and no reason to pay these guys anything.

3. Don't worry about interest rates. For those who use credit cards properly and never pay interest, interest rates are irrelevant (10% of $0 is the same as 30% of $0).

4. Treat credit card purchases as you would cash purchases. Never buy anything extra just because you can buy it on credit.

Bottom line: Credit card usage should be 100% FREE. If you do it right, you should never pay a cent to the bank.

On top of that, many cards offer rewards. You get money from the credit card issuing bank, even though you never pay them anything. You won't get rich from these rewards (typically around 1%), but they can be a pleasant little bonus on purchases you would have made anyway.

I purchase almost everything with credit cards- I use cash so rarely that when I put $100 cash in my wallet, it lasts all year. I use my credit card even for a $3 purchase at Taco Bell or a $1.50 parking lot fee- because that little cash back reward adds up.

Over the past several years, my usage of credit cards has cost me NOTHING- no interest payments, no fees, not even the cost of a stamp. Over that time, I have accumulated hundreds or thousands of dollars in cash back and merchandise rewards (not to mention the bonus money many cards pay you to sign up).

Anyone can achieve similar results if they use their cards responsibly.

The hardest part is determining which card is best for you- a cash back card (Discover was one of the first to offer this), an airline miles card (United Mileage Plus, etc), or a merchandise card (e.g. GM Card).

Let Students Fix Your Teeth

With high unemployment, a lot of people have lost their health/dental benefits. Others have never had dental insurance and badly need affordable dental care.

The cost of even routine dental care has become very expensive, and even simple fillings can run over $100, to say nothing of fixing complex dental problems.

However, I recently found an inexpensive and high quality alternative that some people may be able to use.

Dental schools have students who need patients to practice on. If you live near one of these schools, you can apply to be a patient and pay prices much lower than you'd pay at a regular dentist's office.

Here in San Antonio, the dental school's web site is at: http://www.dental.uthscsa.edu/becomeapatient.php

Yes, I know, having of an inexperienced person drilling into your teeth doesn't sound like a good idea to most people. That's what I thought at first, too.

However, I found the care, if anything, to be better than what I experienced on the outside. For one thing, the students are being supervised and graded by experienced instructors. They work very hard to make sure they do the job right, and are very closely watched- they have to check with an instructor at every stage of treatment.

Also, they are a lot more thorough and spend a lot more time with you than a commercial dentist will. I've been to some commercial dentists where it felt like I was on an assembly line- then dentist spent as little time as possible with each patient to maximize profits.

The web site says dental students charge about 60% less than commercial dentists, which seems to be about right. I paid $39 for a very thourough exam (by both the student and an instructor), $19 for the most complete set of x-rays I've ever had, and about $40 to have a cavity filled (this varies depending on the size of the cavity and difficulty in repairing it).

However, there are some drawbacks. First, you have to have a dental problem for students to work on- if you have perfect teeth and just want a cleaning, you probably won't be accepted as a patient.

The biggest negative is that going to the dental school is time consuming. As I said, the work is very thorough, the students spend a lot of time with you, and everything must be approved by an instructor. This means that a session to have a filling done that might take half an hour with a commercial dentist might take an hour and a half at the Dental school.

Lastly, payment is expected at the time of service. As far as I could tell, there were no options for payment plans- it was cash, check, or credit card only.

Bottom line: if you want high quality dental care, and aren't pressed for time, your local dental school may be your best option.

Drink Your Way to a Million Dollars

Every year, well over $60 BILLION is spent on bottled water.

Somehow, people around the globe have been convinced to spend big money on water. Thirty years ago, the market for bottled water was almost non-existent.

My hat is off to the marketing geniuses at Coca-Cola and the other large bottlers who have cleverly managed to convince Americans to spend hard earned cash on a product that we used to get for free.

The really bizarre thing is that these people think they are getting value for their money- like bottled water is somehow better than plain old tap water- which is really amazing because a huge chunk of the bottled water sold in this country IS TAP WATER- municipal water repackaged and heavily advertised (sometimes they run the tap water through a filter first).

Just for fun, read the labels on some of those bottles. They'll usually have a fancy name like Aquafina Dasani Refreshing Energy Water- but if you look on the label, in really small print, you'll likely see something like "made from filtered City of Cleveland municipal water"- ummm, delicious!)

It's NOT "better for you." It is NOT "more pure" (for many years, the standards for tap water were more stringent than for bottled). It's just water in a plastic bottle (and the chemicals from that plastic bottle may be leaching into your water- umm, chemicals).

I'm not even going to get started on the environmental damage done by people buying bottled water, because this blog is supposed to be about money, and I could rant for a couple of pages on that subject alone.

I don't think a lot of these people even think about how much money they waste on the stuff. Prices of bottled water vary significantly, but you will likely pay 50 cents or more per bottle.

Drink just 2 bottles a day, and you end up paying $365 a year. I know that doesn't sound like a lot to most people, but little expenditures add up over the long haul. If you had chosen to drink tap water instead of bottled water, over a 45 year period (the number of years a typical person works), you could have saved about $288,000 (assumes a 10% return on investment in a tax free retirement account).

Making little savings like this can be the difference between retiring penniless or retiring as a millionaire.

Think about all the other places you spend small amounts of money every day. Do you order the $2 iced tea or soda with lunch rather than drinking the free water? Do you buy a $4 cup of Starbucks coffee rather than drinking the free coffee at work? Do you spend $6-10 buying your lunch every day when you could brown bag your lunch for a dollar or two? Do you pump a couple of bucks into the snack machine every day?

These are the kind of little expenditures people make every day and don't even think about.

Lets say you just spend an extra $5 every work day- maybe $1 on bottled water and $4 on that triple-shot hazelnut lowfat frappucino grande vente latte frappucino (or whatever those things are called- I don't speak "Starbucks" language very well).

$5 every work day x 250 work days per year= $1,250 per year.

Using the same assumptions as last time, if you'd avoided these expenditures and invested the money instead, you'd have $988,494! Lets round it up and call it an even $1 million.

Yes, that's right, just by choosing free tap water and free office coffee over bottled water and fancy coffee, you could drink your way to becoming a millionaire!

Dumping Expensive Home Phone Service

A lot of people are getting rid of home phone service altogether and using cell phones exclusively. However, cell phones have many shortcomings- they may not work well in your home, they aren't as effective for 9-11 service, etc.

Unfortunately, even basic phone service from the phone company is expensive. While local service starts at around $15, by the time you figure in all the taxes and fees, you end up paying on the order of $25 per month before you even make your first call.

Vonage and other VOIP (internet based) phone services are often cheaper when you consider that they include long distance in their plans, but you will still likely pay $25-30 per month.

There is a better alternative.

If you've ever had a bout of insomnia and found yourself watching TV at 3 a.m., you've probably seen a commercial for a gadget called the "Magic Jack."

For $40, you buy a little USB gadget that plugs into your computer. This gadget claims to give you unlimited local and domestic long distance service for one year, and cost's $19.99 for each year thereafter.

Like most late night infomercials, the claims sound too good to be true. As a person who is not a heavy long distance user, I was not happy paying $30 a month for my unlimited VOIP program through my local cable provider, so I figured I'd give it a shot given that you can return it within 30 days if you buy from Magicjack.com or using normal store return policies if purchased elsewhere.

I installed it a month ago AND IT WORKS!

Installation was easy. Open the package, plug your regular home phone (wired or portable) into the device, then plug the device into an available USB slot on your computer. Wait a few minutes while the software automatically installs, then fill out a simple registration process. No big deal- I estimate it took less than 10 minutes for the entire process- getting the thing out of the heavy plastic packaging was the hardest part of the installation.

You get unlimited calling, voice mail, E911 service (the same 911 service you get with other VOIP providers) and call waiting, as well as some stuff I haven't tried yet (e.g. conference calling).

The drawbacks:

1. You can't port over your old home phone number. I've seen some web sites that say you can, but I sure as heck couldn't figure out how to do it. They will give you a bunch of new numbers to pick from. If you are in a large city, you will be able to choose a local number. If not, you may have to choose a number outside your current area code, which means that local friends may have to pay long distance fees to call you.
2. You have to dial the full 10-digit phone number every time, even for local calls. A minor annoyance which is easily fixed by programming numbers into the system.
3. You have to leave your computer running all the time to make or receive calls. When your computer isn't on, the Magic Jack will take voice mail messages. Since your computer is going to be on all the time, I recommend putting it to use by running a distributed computing program in the background. Distributed computing harnesses the power of thousands of PCs to act as a sort of supercomputer to conduct scientific research or find cures for diseases. I've been running distributed computing programs on my computers for years. The best place to get the software and information about distributed computing is: http://boinc.berkeley.edu/.
4. Every once in a while, you won't get a dial tone when you pick up the receiver- all you have to do is hit the flash and it will work fine.

The bottom line: it is not quite as nice as my old VOIP and regular phone service was due to the minor problems listed above.

But for less than $4 a month, this thing is great. I dumped my VOIP service completely. I'll save about $360 this year using Magic Jack (heavy long distance users may save even more).

For $360, I'll put up with those minor inconveniences. Also, some people may want to get one as a cheap second phone line. If you call overseas often, buy one for your foreign friends/relatives- you can call from your Magic Jack to theirs for free.

Negotiate Your Cable/Phone/Internet Bill

Cable and Satellite providers love to hook new customers with "teaser" rates. Usually these teaser rates come if you buy a bundled package of cable/phone/internet and are significantly below the regular rate.

Of course, as soon as the tease period is over- usually 6 months or a year, they will hit you with a bill that will probably knock you to the floor. Most people, not wanting to bother switching to a competitor, just grimace and pay the new rate.

However, you don't need to do that. The cable company makes a killing off the people who meekly accept their fate and pay whatever the cable guys demand.

Smart consumers can save a ton of money with a little effort- all it takes is one phone call a year.

Just call up your provider's customer support number and ask to speak to their CANCELLATION department- don't even mess with the "customer service" people as they generally don't have the ability to give you a really good rate.

Once you get the cancellation department, Tell them that you love the service, but just can't afford to pay the regular rate, especially given that their competitor (satellite company/phone company/competing cable company) is offering a great "new customer" rate.

If they try to get you to reconsider with some minor discount, don't fall for it. Hold firm until they offer to give you another 6-months to one year at the teaser rate. This will work every time- they still make money off of your account even at the teaser rate, and they don't make any money if you switch to a competitor. One 20-minute phone call every 6-months can save you $30 or more per month on your bill. That's a pretty good use of your time. I've been doing this for years, right up until last month (I'll explain why I'm no longer on the full bundle in my next installment).

A few pointers:

-- Be pleasant. The service representatives deal with angry customers all day long, they will be often bend over backwards to help someone who is rational, polite, and even friendly.
-- Use current conditions to your advantage. The economy is bad and everyone knows it. If you want to jazz up your story, tell them you can't afford to pay the full rate because you just got laid off. It can't hurt, and may garner some sympathy from the representative, enhancing your ability to keep your rates low.
-- Be prepared. When you tell them that you are going to switch to their competitor (even though you have no intention of doing so), you will sound a lot more convincing if you can quote the competitor's current teaser rate.
-- Be willing to walk. I've never needed to do this, and probably never will need to, but if they decide to call your bluff, you can always switch to the competitor.

Property Tax Assessment Protests

Even with real estate prices falling throughout much of the country, many of us find that our local taxing authority is continuing to raise the assessed value of our property.

If you feel that your property is being valued unfairly, you have the right to protest the assessment and reduce your property tax burden.

This can be an intimidating process. Most people don't know how to protest, think they have no chance of winning, or even feel that there will be retaliation if they stand up for their rights.

I've protested my assessed value a number of times over the years and have had some successes and some failures. I live in Bexar County (San Antonio), Texas, but you may have a similar process where you live.

If you decide to protest, you will receive a letter giving you two appointment dates: the first is for an optional "informal" meeting with the person who did your assessment and the second is the formal protest before the Appraisal Review Board (ARB).

The first three or four times I protested, I foolishly skipped the informal process and only went before the ARB. When you go to before the formal board, you are put in front of 4-5 very cranky looking people. They are about as friendly as a parole board (or a firing squad). You make your case- present evidence, beg for mercy- anything you think will help, and hope for the best. My experience is that they rarely see things your way, no matter how well you present your evidence. Typically, they will either give you no relief or give you a token reduction in assessed value.

I've been far more successful using the informal process. You meet one on one with the appraiser and the atmosphere is not nearly as intimidating. If you have a legitimate claim, they will usually give you a fair hearing and, in my opinion, are far more likely to lower your assessed value.

The important thing is to make sure you treat them with respect. If you go in angry and with an aggressive attitude, you will probably fail. If you are friendly and respectful, they will usually respond in kind and you will be much more likely to reach a good agreement.

Unfortunately, if you do lower your assessment, you will likely find that it shoots right back up again next year. At my informal hearing last week, the appraiser told me that they use a computer program to assess entire neighborhoods, and the program does NOT take into account the results of any protest.

I suspect they program it this way intentionally, knowing that a lot of people just get fed up having to go in every year and fight the system- it takes time that most working people just don't have.

Alternatively, there are now companies that will represent you in the process- you don't have to do anything. They will usually take 40% of any tax savings as their fee. I've never used any of these services and would appreciate any insight anyone has on their effectiveness.

Why Does This Blog Exist?

From time to time, people ask me for advice and money saving tips. I found that I often end up dispensing the same advice over and over again. So I thought I'd start putting some of this stuff in writing so that I can just refer people to this blog.

For those who don't know me and somehow stumbled onto this blog, here's a little bit about me.

I'm a 47-year old semi-retired engineer. While I still do part time consulting work on occasion, I haven't worked full time since late 2006.

When I tell people that I haven't worked in three years, I usually get reactions varying from pity (the poor guy must be destitute) to consternation (people think a guy in his "peak earning years" who doesn't work must be some sort of weirdo).

I'm not poor, I'm living very comfortably and have no financial worries- something I believe most of us can do, even if we don't have a large income.

As far as "weird" is concerned, I guess I am a bit odd. I've never subscribed to the theory that we must continually work harder to climb the corporate ladder so we can earn more money to buy more stuff to make ourselves feel better or impress people.

I don't try to keep up with the "Jones'." If the Jones' want to live in a big house with a bigger mortgage and drive his and hers Lexi, it doesn't bother me and I have no desire to compete. In my opinion, worrying about what other people think is a huge reason people to achieve financial independence.