Are Rewards Credit Cards Worth It?

Earlier, I was reading the post ‘Thoughts on Going Cash Only- The Benefits and Drawbacks of Not Using Credit Cards‘ on Think Your Way To wealth. It’s a well written post that outlines some of the benefits and drawbacks of using cash versus credit.
One of the comments struck me as very interesting. In part, Get Out Of Debt wrote, “As for the earning rewards stuff – do people really earn that much from their credit card rewards? I’m pretty sure it’s trivial amounts, and you have to spend tons to make it worth it i.e. spend money you haven’t got.”
This got me thinking because my experience has been quite the contrary. Let me go through the points here:
Background
Both my wife and I have Citi Dividend Rewards credit cards. The card pays 1% cash back for regular purchases, and 2% for purchases made at grocery stores, drugstores, gas stations, utilities, and convenience stores. Back when we first signed up, they actually paid 5% for some of the special categories.
Point 1: Do people really earn that much from their credit card rewards?
We have been collecting our rewards into a savings account with the intention of eventually replacing some of the electronics in our home. It’s total luxury but our rationale is that the money we’ve earned through this credit card has been ‘extra’ so we agreed that we can save it for some fun stuff. Our goal is to replace our 32″ tube television with a flat screen TV once the TV dies. How long this could be is anyone’s guess. The TV is about 12 years old, so it could go tomorrow or it could be another few years.
In any case, here’s how much we’ve got set aside that has been paid exclusively from our Citi Rewards cards: Over $800.
My guess is that by the time we’re ready to replace the TV, we’ll be able to buy a new one without going outside the money in this account. At least that’s my plan.
My thought: Yes, it is possible to earn that much from a rewards card.
Point 2: You have to spend tons to make it worth it
We’ve been collecting the amount we have for three years or so, maybe a bit longer. Still, in that time we’ve used our credit cards mainly for the category spending that gives us the most rewards.
Let’s look at an example.
Say you use your credit card as follows every month:

  • Groceries – $350
  • Gas – $200
  • Utility Payments – $100
  • Drugstore Purchases and Prescriptions – $50
  • Gifts – $100
  • Travel – $100

The first five categories are the ‘bonus’ categories. These total $700, so at 2% back per month you would earn $14. The bottom two categories total $200 and at 1%, you would earn an additional $2, for a total of $16 per month.
Over twelve months that totals to $192.
This is pretty typical of an average month for us. Often the gifts and travel are something else, maybe clothes, maybe a day trip, but a couple hundred dollars of ‘other’ spending per month on our credit cards is fairly normal for us.
Now, we’ve done better than that, averaging about $267 per year. I’d account the differences to:

  • Additional money earned the first year before Citi cut the rewards from 5% to 2% on the special categories
  • Charges made of large purchases during our wedding and honeymoon planning strictly for the purpose of gaining cash back rewards. One example: our honeymoon. We splurged and went to Hawaii. This was not cheap. Still, we put it on our credit card and paid the credit card with the money we had saved for our honeymoon. Even though we were ‘only’ getting 1%, that was probably $50 that we wouldn’t have had otherwise. It adds up.

My thought: You don’t have to spend a lot to make it worth it. If you find a card that rewards you for the spending that you do anyways, you’re getting something for nothing, and even with the basic $192 per year, that can add up pretty quickly. However, keep in mind that this assumes you are not carrying a credit card balance.
Point 3: You spend money you haven’t got
My wife nor I have ever carried a balance, and we haven’t spent on our credit card just for the sake of spending. Both of us pay our balances in full every month, so we don’t send a penny of our ‘reward’ back to the card company in interest.
As I said above, we’ve charged things that go to our monthly expenses, or larger ticket items that we have the cash saved for already.
My thought: It boils down to responsible spending. If you can be responsible with a credit card, then it is possible to do really well with a rewards card. But, if you have had trouble with credit in the past, then it might not be worth the risk of getting in over your head.
So, I guess I’ll sum up by saying that my experience has proven opposite of what the comment shows. But, we’ve also been very lucky as to not have had credit problems. Each situation is unique and I think everybody should ask whether they can handle the availability of credit. If history has shown that you can, then by all means I suggest considering the right rewards card.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

A Tale Of Two Garbage Bins

I wrote a while back about our new garbage service. Well, it’s been in place for a little over a month and I have to say that it is working out great!
The city provided two bins, one is a 90-gallon trash bin and the other is a 65-gallon recycling bin. The new recycling program takes a LOT more stuff than I’ve ever seen. They take cardboard, all types of paper, plastic bags, and all plastics labeled 1-7. Most recycling programs I’ve seen take only those labeled 1 or 2.
Mrs. Beagle has led the charge in our house to be more conscious of recycling. As such, we have found that we’re recycling most of our stuff and the garbage is very empty. In fact, we wish that they would allow us to switch the bins and make the larger bucket the recycling bin, which would give us more room.

Needless to say, the recycling won, as it has been since we started using the program.
One of the cool things is that we participate in a program called RecycleBank. When you recycle you get points that you can then ‘cash in’ for coupons or gift cards for local or national retailers.
We average around 70 points per week so far. Some of the example rewards are:
  • 100 points will buy you a $10 off $30 purchase at Bed Bath & Beyond
  • 125 points will get you $6 off two dinner entres at Olive Garden
  • 1225 points will get you a $10 gift card at Applebee’s, Lowes, or Borders
These are just a few of the things that you can get. While the rewards do provide extra motivation, it is reward enough to know that we’re helping save some of our precious natural resources.
One thing that they have that’s really cool is a little indicator that adds up all of the recycling you’ve done and puts it in somewhat everyday terms. They have a widget available that I can add to my blog to automatically update the information but I need to work on fitting it into the site, as it was causing problems when I attempted to place it due to the size requirements. But, here’s what it tells me:
In the five weeks we’ve been part of the program:
We have saved 0.56 trees
We have saved 37.41 gallons of oil from being required to produce new materials
And the most fun statistic,
Our recycling to date weighs as much as….

A penguin!

How cool is that?
Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

How I Calculate Our Net Worth

I post a net worth update every month and the update for the month will be coming up soon.
I thought I would post a little bit of information about how I track our net worth.

When

I always do our net worth on the 7th of the month (give or take a day). The reason for this is because a lot of transactions take place around the 1st of the month, and can take a couple of days to clear. I want to make sure that everything is cleared and in the right accounts, and have found that waiting a couple of days past the first of the month is the best way to make that happen. These things include:

  • Mortgage payments
  • Credit card payments
  • Transfers from end-of-the-month paychecks to savings / money market accounts

How

The tool that I use is Microsoft Excel. I actually used to use a couple of different tools in the past, but have found that Excel works best for me. The spreadsheet that I have has evolved over time.
Initially, the spreadsheet was created to track my gains/losses back when I was doing some day trading (wasn’t everybody) in the late 90’s. In fact, the spreadsheet is still called Investment Analysis even though I have moved on from my day trading ways, and have evolved the spreadsheet into different things.
I have several different tabs that I utilize.

  • Snapshot – This is a snapshot of the most current moth, and it’s broken down into the categories which I will outline in a bit. It summarizes everything that I track and rolls it up into several categories.
  • History – I roll up the high level numbers each month into a month-by-month breakdown. This lets me see how things have progressed over time.
  • Balance Sheet – This is where I separate the assets from the liabilities (yes, I took lots of accounting classes in college). I have thought about merging this with the History tab, but it has worked out OK so far.
  • Debt – This is where I break down our debt and can see the history of how it’s progressed. This is a great tab for me since we have focused a lot of our personal finance goals over the past couple of years around paying off debt. With this, I can quickly look at how long it took to pay off our car loan (23 months on a 48 month loan) or track how our mortgage is paid off a wee bit more each month.
  • Savings – I have two accounts with cash savings, an ING Direct Orange Savings account and a GMAC Demand Notes account. This is where I track things like our emergency fund, our savings for the next car, our savings for vacations, furniture, our Christmas gift fund, where we keep money for expected car and home repairs, and things like that. One thing that I’ve always done here is ‘write down’ a portion of the account based on what I know we’ll be spending soon. For example, last year we had built up our home repair fund to do some backyard landscaping. Since I knew that we’d be spending this, I started writing down the amount months before. That way, when we spent the money, it didn’t eat a big chunk of our net worth.
  • Monthly Summary – This is a hybrid of an Income Statement and Cash Flow statement that I use to track our bank account activity and spot any trends.
  • Ledger – I don’t balance a checkbook. In fact I barely write checks. This is what I use to track our day to day spending activity and to know what we have in our bank account. I reconcile this almost daily with our account.
  • In Case of Emergency – I have a tab dedicated to outlining all of the required information in the event that something were to happen to me or my wife, such as account locations, website addresses, etc.
  • A few other tabs – I track a few other things such as charitable contributions, dividends paid by our mutual funds, cost basis for our mutual funds. These aren’t used every month but kept pretty up to date, and help around tax time.

With all of this, I have pretty much everything I need all the time. I actually had attempted to use Microsoft Money a few years ago, but felt it actually restricted me and didn’t let me manipulate the numbers to the degree that I like. I tried it for a few months, hoping to be able to phase out the spreadsheet, but ended up phasing out Money instead.

The Calculations

I break our net worth down into the following four major categories:

  • Housing
  • Automobiles
  • Current (Liquid) Assets and Debt
  • Retirement Assets

Here’s a breakdown of each of those:

HOUSING

I track the value of our house based on three things: The value reported by CyberHomes, the value reported by Zillow, and my own personal adjustment based on what I’ve noticed in terms of neighborhood sales.
So most recently, I’ve averaged the two and have deducted another 3%.
This gives me the approximate selling value I would expect to receive. However, for net worth purposes, I actually deduct the anticipated selling costs that would be involved with selling the house. So, I write 7.75% off. The reason for this is simple: The only reason I would ever have true interest in the value of my house is if we had to sell it, so I want the value to reflect what we would ‘get’ if we sold it.
From there, I subtract our outstanding mortgage principle to give the total value of our home.

AUTOMOBILES

I know there’s a lot of debate about whether to track auto values in your net worth. I lean on the side that tracks it, and the reason is simple: The current value of my car will factor into the next car that we purchase. In other words, one of the two cars that we have is going to partially fund the next car, so I want to know what we can afford.
We have two cars. I use Kelly Blue Book pricing and remove 5%. We do not have any loans, but if we did, I would subtract the car loan balance from the value to come up with our total.
Because cars are depreciating assets, I expect these values to decline every month.

CURRENT (LIQUID) ASSETS AND DEBT

This is where I track anything that is cash or could easily be converted to cash, as well as what we owe for anything outside of the mortgage and car payments.
So, the things that I currently track are:

  • Bank Account Checking (asset)
  • Bank Account Savings (asset)
  • ING & Demand Notes Savings (asset)
  • Mutual Funds (asset)
  • Outstanding Credit Card balance (debt) – note: we pay our balance in full every month but this tracks the current outstanding balance at the time I do the monthly check
  • Student Loans (debt)

RETIREMENT ACCOUNTS

I have three 401(k) balances, two from previous employers and one with my current employer. I also have a Roth IRA but haven’t looked into investment ISA opportunities. At some point, I hope to open a Roth IRA under my wife’s name as well.

TOTAL NET WORTH

Once per month, I log into accounts for each of the accounts and enter the numbers. From there, it calculates the value by each category and those totals equal our net worth.
That’s it! Overall, I know it isn’t the perfect system but it works well for me. There are things that I want to improve upon. I’ve got some tabs that I’m working to merge. I also need to figure out a way to clear out old information without making it impossible to review later on. But, for now, it gives me the information I need to know in a way that makes sense and lets me know if we’re making progress and meeting our goals.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Deciding On Our Baby Monitor

We have spent the last few weeks deciding what baby monitor to get for Baby Beagle. Based on recommendations from various people, including friends, family, and our birthing class instructor, we had narrowed it down to two different types: a video monitor or a movement monitor.

A brief description of each:

  • A video monitor – In addition to offering the typical sound monitoring, you could also mount a small camera and watch your baby. We were at a friend’s house a few months back, and they swore by this.
  • A movement monitor – Our childbirth class instructor recommended a movement monitor. In addition to the sound, there was a device that was placed in the crib that sounded an alarm if there was no movement for 20 seconds. This was designed to warn if the baby stopped breathing. The alarm would alert the parents with the goal to reduce the chance of SIDS.

We picked out our favorite kind of each type. Here’s the one we considered of each type, as well as some pros and cons:

Video Monitor

Summer Infant Deluxe Day & Night Handheld Color Video Monitor with 2.5

Pros: Can see your baby
Cons: Only one monitor, inability to monitor babies movement, requires wall mounting of the camera.

Movement Monitor

BébéSounds Angelcare® Deluxe Movement Sensor with Sound Monitor

Pros: Two monitors (one for each parent), alerts if baby isn’t breathing, cheaper than the video monitor, room temperature monitor, built in night-light for nursery.
Cons: Requires hard surface to be placed at the bottom of the crib, alarm will sound if you forget to turn it off before removing the baby from the crib.

Our decision

We went back and forth a few different times. We loved the idea of watching our baby but also loved the idea of knowing that our baby was breathing.

In the end, we ended up going with the movement monitor.

The reason was the safety issue. While seeing our baby would have been cool, we know that first time parents are constantly getting up and checking that the baby is still breathing. This should hopefully give us some peace of mind so that we don’t have that worry, and can catch a few more winks. And since I have had no less than ten people over the last two days tell me how little sleep we’ll be getting once the baby comes (and no, hearing it NEVER gets old), I figure any little bit we can add to our sleep schedule will be nice.

We purchased it today. I think it was the right choice, but only time and the baby will tell. We’re only a couple of weeks away from the due date, so we will definitely be able to tell soon!

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