Debit versus Credit

Cut Down On Your Food Expenses By Gardening

I’ve grown rather fond of gardening over the past year. I love spending time outside with the fresh air, the dirt, the bugs and the plants. I love to watch a seed (or a tiny plant) turn into a large fruit-bearing plant. I also love the fact that I can actually reduce my food expenses by growing a garden.

This past summer I had a small-ish garden (about 8 plants total), but was still able to procure lots of tasty fruits and veggies (sometimes more than I knew what to do with). I grew tomatoes, zucchini, green beans, blackberries, cilantro and even attempted to grow a few sunflowers. I also planted a grape vine, although it has yet to bear fruit (these things take time).

Here are a few pictures from my garden (you can click on them to show the original if you’d like).

Gardening really is brilliant isn’t it?

As I’ve been learning to garden I’ve learned a few things about the costs involved with gardening and what not to do, if the sole purpose of gardening is to grow your own fruits and veggies so you can actually save money on your grocery bill.

Do’s and Do Nots

Do not buy plants from the garden center of your local hardware store (or nursery). Buy seeds instead. One seed packet will generally cost just a couple of bucks and contain enough seeds to grow anywhere from 20-50 seedlings. Compare this to the cost of one nursery grown plant which will generally run you anywhere from $2-5 dollars a plant. Your money will go a long way with seeds.

Plan ahead. Pick up a good gardening book at least a month before your growing season and get an idea of planting best-practices: when to plant, where to plant, how to plant (if you live in the desert like I do you might try “Extreme Gardening” by Dave Owens).

Make your own compost. Using compost is important in a healthy organic garden. You can buy compost from your local nursery but it won’t be cheap. So grow your own compost instead. As an added benefit you’ll cut down on garbage in your can (and in the landfills).

Build a drip system or some other type of watering system for your garden. Harvest rainwater and use it to water your garden if possible. Use some type of mulch to keep the ground from drying out too quickly.

Raised gardens are great, but aren’t always the best option. If you have high-quality soil in your yard you don’t necessarily need a raised garden (these are often used where soil quality isn’t the best). If you do prefer a raised garden bed then think outside of the box when building it to save money. Building out of redwood is nice, but there are much cheaper materials. Try old bricks, stacked tires, crates, etc. These materials could likely all be found for free, if you look closely enough.

For those who are interested in growing your own food, I hope this gives you the little extra nudge you need to get started. For those who aren’t sure gardening is for you, give it a try! I bet you’ll really enjoy it.

Blog Action Day

This was my post for Blog Action Day 2011. The topic this year is food. For more information on blog action day and what they’re all about I’d recommend following the link in the Blog Action Day banner. Make it a great day!

October 16, 2011
Debit versus Credit (card)
As many of you may recall I recently attended the first ever financial blogger conference where I met more than a hundred other finance bloggers. While introducing myself and this blog they’d often ask if I primarily blog about credit and debit cards. I was asked many times if I blog about the difference between the two aforementioned payment methods and which is better. What could I say other than the truth? I had never once covered debit versus credit cards in a blog post. Flabbergasting, I know.

To be fair, I started writing this blog (and picked the name) while I was still working on my undergrad at Arizona State University (Go Sun Devils!). At the time I was taking my core finance classes, including those in accounting. The name of this blog comes from the accounting terms, not the payment tools, so it honestly never dawned on me to write about the difference between the two.

All of that being said, I figure it’s about time I talk about Debit versus Credit (cards).

Let’s get things started off with a question. Which is your preferred payment method? A debit card or a credit card? Leave your comments below (and vote on the poll).

[poll id=”10″]

I personally use my debit card for most of my everyday purchases. That may change in the future, or it may not. Up until about a month ago I received reward points when using my debit card, which were shared with my credit card reward points. My bank recently dropped their debit rewards program (of course this is far better than a $5 a month debit card usage fee — looking at you Bank of America).

Let’s cover some of the more commonly-known differences between a debit and a credit card first.

Debit card

Money is withdrawn from your linked checking account, generally immediately (sometimes delayed by as much as a business day).

You can often run the card through two different payment methods, e.g. credit (VISA/MC network) or debit (or through EFT: electronic funds transfer) — either option you choose will withdraw the money directly from your checking account

Credit card

Money is charged to an open line of credit you have established, which will then require repayment

You can only run the credit card through one payment method

The important stuff

When you use your debit card you take on a certain amount of liability risk through something known as card blocking as well as through fraud.

Card blocking is when a merchant places a hold on a certain dollar amount (typically a preset amount, say $50) when you use your debit OR credit card to buy something. This is most common when buying gasoline for your automobile. When you use your debit card you’ll want to be cautious of your card information being stolen because if it is and someone uses your card it could end up causing you to overdraft, or not have enough money in your checking account to pay your bills.

Be careful when using your debit card and avoid using it to purchase things online if you can. Having worked at a bank in the past I’ve seen people’s checking accounts have hundreds of dollars (or more) withdrawn from a fraudulent debit card purchase and then they find themselves without any money in their account until all of the money is refunded (can take as long as 7-10 business days) or they are paid again.

When you use your credit card you’re taking on very little fraud risk as most credit card companies offer zero liability fraud guarantees. The downside to using a credit card is the associated fees. Read the fine print when applying for a credit card because you want to know what you are getting yourself into. There are three typical fees you’ll encounter with a credit card: an annual fee, minimum finance charge and a regular finance charge.

Some credit cards have annual fees. I won’t get into whether these are worth it or not. It might be. It might not be. That’s very situational. You’ll want to try and avoid credit cards with minimum finance charges, where you get charged a minimum finance charge every single month you use your card. A regular finance charge, of course, is the interest you pay on your credit card balance. Most cards will have a set period of time where if you pay the balance in full you won’t be charged any interest.

How I use my cards

As I mentioned earlier I prefer to use my debit card for the majority of my everyday purchases (I limit my personal liability through structuring my bank accounts a certain way — more on that later). I use my credit card anytime I buy something online. I also use it for non-everyday purchases. Gadgets, home appliances, auto repairs, etc. I always make it a point to pay off the credit card before the grace period is up, so as to avoid any finance charges. I’ve been successful with this about 75% of the time since I started using credit cards in my early 20s. That percentage has been closer to 90% over the past couple of years.

What do you prefer when making purchases? Your debit card or a credit card? Leave your comments below 🙂
October 13, 2011
My Personal Finance Journey part 3
My personal finance journey will never end (actually I guess it will eventually). I’ve come a long way over the past 28 years (read here and here for more on where I’ve been). I’ve got a long way to go yet. Today I’ll talk about where I’ve been over the past couple of years and where I see myself going.

Starting to get a handle on money (Age 26-28)

Two years ago I graduated from Arizona State University with a bunch of student loans and no idea what I wanted to do with my life. Today I still have quite a few student loans (but nowhere near as many as I had at graduation) and only have a few ideas on what I don’t want to do with my life. I’m making progress, but it’s felt like things are happening at a snails pace, which can certainly be frustrating.

After graduation I started working for USAA Federal Savings Bank in their mortgage department. I’d had several years experience in banking at that point (after working for a local credit union for about 4 years) and so I took the first job I could find. That said, I was ecstatic to have landed a job at USAA because I’d heard nothing but good things about them and because I really enjoyed doing business with them.

Unfortunately being on a phone all day will take its toll on you even with the worlds greatest members. After about a year I was fed up with the job and frustrated because I felt like all of the skills I learned while earning my degree in business were being wasted. I expressed my concerns to my manager and tried to find a different job better suited for me within the company. Unfortunately I was never able to land a different position.

I started applying for jobs elsewhere.

Very recently I accepted a position at a small tech/advertising startup, even though I had to take a $10,000 a year pay cut. I’m much happier with work now, but have had to make a few adjustments to the lifestyle my wife and I had become accustomed to.

Surprisingly, after looking at the numbers we figured out we could actually continue to save as much money as we’d been saving, if not a little bit more.

After coming to this realization I realized this little tidbit of information:

It’s easy to slowly improve the lifestyle you are accustomed to, without realizing you’re actually improving it.

This is similar to boiling a frog alive (I’ve never actually done this PETA, please keep your clothes on). You know the story, if you drop a frog in boiling hot water it will jump out. If you drop it in water that is room temperature and then turn the heat on the frog won’t realize what is happening and it will boil to death.

A raise at work, a bonus or just some side income can provide you with extra spending money and help to improve your lifestyle. Over time you’ll become more and more wasteful, collect more and more stuff you don’t need until one day something happens and you lose a chunk of income or worse, an entire income source.

It’s smart to automatically increase the amount of money you are saving every single time you increase your monthly or annual earnings. You worked hard for that raise, or that bonus and you should feel like you can finally treat yourself to something nice. That said you should always be thinking about and planning for the future. So take a portion of your increase and put it away, automatically.

This is what I’ve accomplished

I feel like I’m just starting to get a handle on my money situation. I’ve paid off some debt, saved an emergency fund and even started saving for retirement.

Here’s a list of what I’ve accomplished thus far:

Paid off my car (no car payments at all!)

Saved a 5% down payment and bought a house

Saved approx 6 months expenses in an emergency fund

Paid down about 35% of my student loan balances

Contributed every year to my 401k (when offered) and an IRA occasionally

Paid off all credit cards

This is what I hope to accomplish

These are my goals for the near future (the next 5 years):

Save enough money to buy a new car with cash, when I finally need a new one (or at least 75% down)

Max out my IRA contributions every year

Increase emergency fund savings to 9 months worth of expenses

Pay down my student loans by another 50-60%

Continue to keep credit cards at zero balance

That’s all folks. I’d love to hear your thoughts, your goals or even where you’ve been. Please share with your friends as well, thanks so much!
October 11, 2011
A tribute to Steve Jobs

I’m a total business geek.

I love to read and talk about business trends, marketing, finance and accounting. That might be somewhat obvious to you accountants out there due to the name of this blog (debit and credit being accounting terms). I’m also a total tech geek. Gadgets, technology and business — you combine these things into one and it really makes for some interesting conversation. Hence why I’ve been a fan of Steve Jobs, and consequently Apple, for the last decade.

As most of you likely heard by now, on Wednesday Steve Jobs passed away. He was 56 years old.

For some wonderful tributes to Steve Jobs read here, here and here. Mine is below.

There are a few people in this world who are an inspiration to me. Steve Jobs was one of those people. The passion he had for Apple and technology was unequaled and his business acumen rarely seen. The man was a genius when it came to business.

When Steve Jobs returned to Apple in 1997 – after being away from the company he founded for 12 years – the company was in a difficult financial situation and very likely near bankruptcy. He facilitated what may have been the greatest business turnaround ever. In fact, recently Apple became the largest company in the world when based strictly on market capitalization. From near-bankruptcy to the largest company in the world in just over a decade. That’s an amazing accomplishment.

The business geek in me looked up to Steve Jobs for this remarkable transformation that Apple has seen since 1997 and the tech geek has looked up to him for the plethora of amazing products he’s had a hand in creating. The iPod, iPhone, iPad and even Apple computers such as the MacBook Air are all amazing technology products. They just work, and they do it while looking beautiful.

Steve Jobs will certainly go down in history as one of the great minds of our time. He was a great man because he understood that a great leader needs a great team. Johnny Ive, Tim Cook, Phil Schiller, Scott Forstall, even Steve Wozniak. These men are also amazing at what they do and I’m sure were all hand-picked by Steve Jobs at one point to help him build arguably the greatest technology company ever.

Steve Jobs always surrounded himself with greatness. That’s what made him great. May he rest in peace.

October 6, 2011
What Does Financial Freedom Mean to You?

I was driving home from work yesterday when I heard an advertisement from a company that offers financial advice. They were selling their services on the promise of a truly personalized approach. Their message made it clear that they would ask you what your definition of financial freedom is and then use it help you to reach your goals. I thought this was an interesting approach. Here’s why:

Most so-called financial advisers sell themselves as investment advisers or portfolio managers. Most advisers often forget that there’s more to your financial life than just investing and so I was surprised to hear this company market themselves as dream-makers (my term, not theirs). Their asking you what financial independence means to you, shows that they are interested (of course I’m makings a few assumptions here) in helping you achieve all of your financial goals, not necessarily just those related to investing.

After hearing the commercial I got to thinking about what financial freedom means to me and I wanted to ask you, my readers, a little bit about what it means to you as well.

To me, financial independence is being completely debt-free (which means no mortgage), having an emergency fund set aside, maxing out my retirement accounts every year and being in a position to travel and fulfill my philanthropy goals. These goals are most certainly achievable (and measurable as well), but will take plenty of discipline, time and hard work to get there.

Here is my question for you, my amazing readers. If you were meeting with the previously mentioned financial advisory company what would you tell them when they ask you what financial independence means to you?

October 5, 2011
It’s time for the Financial Blogger Conference!

I’m on my way to Chicago for the Financial Blogger Conference, 2011. I’ve got a jam packed weekend ahead of me, between a service project, the conference itself and even a party, hosted by THE MAN himself, Ramit Sethi of Iwillteachyoutoberich.

I’ll be learning a lot about blogging, monetization, and meeting up with hundreds of like-minded personal finance bloggers to talk about money, investing, saving, budgeting… you name it.

If any of you live in Chicago and want to meet up for dinner, a drink, whatever, hit me up. For those not anywhere near Chicago — no worries, I’m not that interesting. 🙂

In the meantime I’ll be taking lots of notes and anything I learn/talk about that would be relevant or beneficial for all of you I’ll definitely be sharing. Something to look forward to right? Have a great weekend everyone and keep on building wealth!

September 30, 2011
Looks like I made some mistakes on my tax return

It’s the week of the Financial Blogger Conference and I’m very excited to meet all my fellow personal finance bloggers. I should have some great content to share with all of you in the weeks following the conference. In the mean time I wanted to talk a little bit about a situation I found myself in recently that may require me to break into my piggy bank.

I received a letter from the IRS about 3 weeks back. The moment I saw a letter from the IRS I wasn’t feeling too good. Receiving a letter from them this far away from tax season can’t be a good sign right? Sure enough it wasn’t. They claimed I had made some mistakes on my tax return and owed about $1,200 dollars in taxes.

Ouch.

Not exactly having $1,200 set aside for tax payments, I figured I’d better figure things out before ponying up the money. Luckily I paid for audit defense when I filed that year (this is for the 2009 tax year — they’re a bit behind I guess), so I called up the audit defense company and sent them the documents they requested (W2’s, the letter from the IRS, etc.).

With any luck we’ll get that $1,200 down to a more reasonable amount, but just in case I’m writing off the money now. Plan for the worst and hope for the best. I try my best to live by that saying. Nevertheless the audit defense company should have everything filed with the IRS before the end of the week, so hopefully I’ll find out soon what the damage will really be (the IRS is trying to charge me taxes on a private scholarship I received).

I’ve been using Turbo Tax Online to file my taxes for the past several years, but after this event I’m considering hiring an accountant to do it for me. If I’d have filed correctly in the first place I wouldn’t have to deal with this (and possibly have to pay interest on the unpaid tax amount). So my question to all of you is this, do you do your own taxes or do you pay an accountant to do them for you (and why)?

September 27, 2011