I am at the point in my financial blogging journey that I think it is time to try some different things. I have chronicled a lot of my journey on the mistakes I have made, investing choices, buying a house, etc. Like everything, however, I am constantly evolving. I read a lot about personal finance and try to institute any new lessons I can into my own personal finance journey. I also know that there are MANY roads to Rome. There is no one bulletproof solution for everyone. So that is where the experimentation comes in. What can I do to improve on past behavior or try new products that will get me to my overall goal of financial independence faster?
I don’t think I will be doing a lot of experimentation, but every month or so I might try one or two items (e.g. trying to save $100 or so on food or whatever it maybe). These financial experiments will most likely be subtle changes in my own financial behavior that hopefully will pay some dividends small and large.
So my first financial experiment that I have been doing for the past month or so: A cash back credit card. I have chronicled here my struggle with credit card debt. I don’t like credit cards normally. I try to avoid them because I have gotten in trouble in the past and done some pretty stupid things. But because I have gotten a bit better with my finances over the last year or so I thought I would experiment.
So I recently signed up and received the Fidelity Investment Rewards Visa Card. The card gives me 1.5% on all purchases for the first $15000 and 2% after that. I AM NOT ADVOCATING YOU GET THIS CARD! But because all of my financial holdings are at Fidelity, I do spend money on items each month, and I don’t have credit card debt at the moment I thought I would try a rewards cards.
So what I do is that every expense that I can (gas, groceries, etc) I put on the card. I do not put anything on there that requires me paying an extra fee or something like that. Every other week I pay off what I have put on the card in FULL! This experiment won’t work if I don’t pay off the card in full (something which I haven’t done in the past).
The advantages of doing this are:
- I keep track of all of my spending. Although you can do this with free services like Mint.com and others I also like doing it here on this card.
- I receive cash back and I can use that money for anything. I am going to use my rewards to put in my Roth IRA. So, in some respects, I am saving extra for retirement.
- I don’t have to worry about paying this item with this debit card or cash or whatever.
- It reduces the amount of cash I carry in case I lose it, although I probably do carry a small amount just for small items that might cost $1 or so.
The other part of this is that I am taking each paycheck and depositing it directly into my savings account. Whenever a bill comes up that needs to be paid (I have online billing for a lot of my stuff and it comes out on the same day every month) I just transfer the money to the checking account the day before and that money is automatically removed. By doing this I also get in the habit of automatic savings, which I have been pretty good about, but since I hate seeing my balances go down I am more loathe to: 1) want to take money out of my account to buy stuff; 2) cognizant of what goes on my credit card because I will have to pay that bill.
Now there is the possibility I could spend more money because things go on a card. Studies demonstrate people spend more money when they use credit cards than cash. That is true. However, because I am paying this off every two weeks and I HATE seeing my savings balances go down I think about every purchase that I make and I can honestly say there have been five occasions when I passed on buying something because I didn’t want to “lose” the money.
So we will see how this experiment goes. This only works if I continue to pay that bill in FULL every month. Let’s hope I do it!!!!