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1/19/2020

How to keep your money longer when paying your bills

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There is a way to keep your money longer by using credit cards and autopay. I have been using this strategy successfully for several years. It has evened out my cash flow and put cash and rewards in my pocket. This strategy is only valid if you pay your credit card statement balance in full every month. Here how it works.
DATES are important. 
You need credit cards with different closing dates throughout the month. Credit card transactions are billed at set times called billing cycles. The last day of the billing cycle is the account statement closing date. The due date is the date by which you must pay your credit card statement balance. There is a grace period between the statement closing date and the payment due date. By law, the credit card company is required to offer a grace period of at least 21 days. This is the time from your statement closing date you get to make a payment before interest is charged on new purchases. That is 21 more days to keep your money.

The credit cards I use:
  1. Discover closing date 26th due date 21st of the following month
  2. MasterCard closing date 17th due date 14th of the next month
  3. Visa 6th due date 3rd of the next month
  4. I also use my wife’s cards if the closing date is more advantageous.
  5. Closing dates can vary by a few days based on the credit card billing cycles. For example, the 23-day billing cycle may have different closing dates after February, July, August. So don’t cut this too close. The credit card due date will always be the same.
You can often change your current due date if you contact your credit card issuer. Most will let you switch your due date. So if you already have multiple cards, you can spread the due dates and get started. Changing your due date will change your closing date by a corresponding number of days also.
All transactions since the last closing date will be included in your credit card statement. Credit card transactions are billed at set times called billing cycles. The last day of the billing cycle is the account statement closing date. You have a grace period between the statement closing date and the payment due date that’s roughly between 21 and 25 days, depending on the card you have. Your card has a grace period, The credit card company is legally required to offer a grace period of at least 21 days. This the time from when you get your statement to make a payment before interest is charged on new purchases.
  • DTE autopay on the 27th of the month. Statement closing date the 17th of the next month. The credit card due date is the 14th of the following month. 
  • Autopay DTE March 27. I get a credit card statement on April 17. Pay credit card in full on May 14. That is 47 days, I get to earn interest on my utility payment.
Resist temptation. You can’t spend the money on anything else. You must pay the credit card bill when its due.
I use this strategy with reward credit cards for cash back or travel rewards to help maximize the benefits. I love accumulating miles from paying for utilities. I use the same strategy for cell phones, cable/internet, streaming subscriptions, and natural gas.
If you actually deposit the deferred payments into an interest-bearing account, you may even see a modest gain over a year.
Other considerations 
Monitor your credit card statements carefully. Auto-pay amounts may change. I do not auto-pay my credit cards. This forces me to interact with the website to pay the bill. Therefore I get to monitor my statement before I make my payments.
Using this strategy will allow you to pay your bills on time and keep your money longer while doing it. 


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1/13/2020

Balances income and expenses Financially Healthy Behavior

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The next financially healthy behavior in our series is “balances income and expenses.” Balance is a state of being. We strive to achieve balance in life. When it comes to money, there is much to balance. Wants vs. needs; long-term goals and short-term goals; security vs. risk-reward; retirement savings vs. spend now; debt service and discretionary income; etc.
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Imagine yourself standing in the middle of a long plank balanced on a large ball. One side is expenses, and the other is income. Your spending choices and realized income opportunities determine how much is added to each side of the plank. The ball represents macro-economic factors that may change. Your goal is to maintain balance.

Maintaining your balance requires constant motion. Balance doesn’t necessarily need equilibrium to be successful. Maintaining balance involves attentiveness to details and mini-corrections. Add some to one side or take from the other. Repeat as necessary.

The sides of the plank are not equally weighted. The expense side of the plank is weighted from birth. Humans are an expense from birth to economic viability. Economic viability is when a person is contributing more in value than they are consuming in resources. This even applies to trust fund babies. But they also come with a preloaded income side.

It is easier to maintain balance than it is to achieve it initially. From birth, most working-class families, especially the legacy dispossessed, are crawling up the expense side of the plank trying to attain balance. Unfortunately, they must make that journey through a hostile environment. One filled with “trick and trap” financial services (payday loans), targeted economic disinformation (debt consolidation), and the need to make sophisticated financial and investment decisions (401k). Many are ill-equipped to do so. The financially ill-informed are the prey of financial services predatory capitalists. “Experience is a hard teacher because she gives the test first, the lesson afterward.” Vernon Law.

Trial and error is not an option for most. Recovery is often not easy from such money lessons that extract resources from the already low-resourced, which could also lead to foreclosure or bankruptcy. Additionally, there are extended periods of imposed financial purgatory, effectively barring access to other products and services. These higher standards and lower limits for future borrowing are imposed over a lifetime. The reason there are no non-white Walt Disney or Donald Trump is non-whites don’t get the chance to have multiple bankruptcies. It is one and done. Win or go home. Rather win or lose your home.
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Here are some things to help you balance income and expenses:
MAXIMIZE INCOME
  • Find recession-proof side hustles that fit your goals and lifestyle. Then turn it into a consistent source of revenue. Treat it like a business, and it will reward you.
  • Stay favorably positioned for a raise to increase your income from employment. 
    • Valuable employees can get a raise even in bad times
    • Job performance should be inarguably top-notch
    • Career growth should be focused on lifestyle compatibility, not just income
  • Embrace continuous education. Learn in-demand marketable skills. Stay ahead of the job growth curve by learning skills that have increasing future demand.
  • Create intellectual property. Then monetize your gift.
REDUCE EXPENSES 
  • Lifestyle costs are the most substantial opportunity for most households. Deciding how you want to live and who you want to live around will make a big difference in your expenses. Lifestyle changes are either voluntary or forced. A job promotion or bonus gives you lifestyle upgrade options. Layoff forces lifestyle changes and hard choices.
  • Debt service pre-determines how you will spend future earnings. The less of your earnings dedicated to debt services means more free time for you. Since you “don’t have to work them hours to pay that bill no more.” Now you get to choose how to invest those hours.
  •  Energy usage is a sustained drain on household resources and a necessity of modern life. Use wisely and waste not. Pro-actively monitoring energy consumption will help motivate conservation. Upgrade to energy-efficient technologies (LED bulbs, smart power strips, Energy Star appliances, programmable thermostats) sooner rather than later to minimize waste.​
“Balances” does not mean income equals Expenses. There are seasons when you may willfully participate in imbalance by adding additional expense. Another season where you increase revenue. The key to sustainability is to consistently over time have more come in than goes out.

Financially Healthy Behavior Infographic

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1/7/2020

4 Ways to Deal with Household Income and Expense Volatility

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Income and Expense Volatility ChartIncome & Expense Volatility
 One of the four financial health influencers is the volatility of income and expenses. Households impacted by such volatility find it difficult to achieve financial well-being. Increased expenses or reduced income often dictate tough lifestyle choices and increase stress levels beyond chronic. When there is increased income or reduced expenses, there is a less problematic increase in household discretionary funds and the fun that goes with it. Seasonal workers, those on fixed incomes, or subject to inconsistent hourly work schedules are especially vulnerable to this type of volatility.

These financial shocks can have a devastating effect. 
Income and expense volatility does not have to impede your pursuit of 6 Financially Healthy Behaviors. Volatility can be mitigated by preparing for it. John F. Kennedy once said, “The time to repair the roof is when the sun is shining.” Please don’t wait for it to rain before you prepare. 
One cause of volatility is “stuff happens.” Happens to everybody. No one is immune. To achieve financial well-being, you need to possess the “capacity to absorb financial shocks.” 
Economic setbacks can be self-inflicted or come from external sources. The future economy will be disrupted by geopolitical, weather, or cyberattack events.  It is essential to be able to manage and recover from the inevitable financial shocks. 
Every household should have a disaster recovery plan. The foundation of a financial recovery plan is the Emergency Fund, the “liquidity buffer” between you and ruin. Building an emergency fund is your #1 priority, no matter your age. You should well establish an emergency fund before you divert resources to a debt reduction strategy.
Emergency funds are highly individualized. Sufficiency depends on a variety of factors, including your health, your age, your temperament, dependents, housing situation, the stability of your job, your risk tolerance, and more. Just be mindful of the truism, “It’s better to have money and not need it; than to need it and not have it.” Your emergency fund can’t be too big. Its size may determine how it is stored but not its existence.

4 Ways to Jumpstart an Emergency Fund

  1. Tax refund Don’t spend it. Save it.
  2. Gifts Ask for money instead of things. Return or sell stuff for the money.
  3. Increase savings through increased income from overtime, side hustles, etc.
  4. Simulate the emergency now. What does austerity look like? Are you willing to make and cope with tough decisions? Decisions like those that will be forced on you by an actual emergency. This is best done in bursts. For most households, it is easier to implement austerity for 2 months 3 times in a year than to do it once for 6 months.
  • Cut back hard on your lifestyle.
  • Fund only NEEDS not WANTS.
  • Exercise EXTREME frugality.
“Savings” ain’t savings until you deposit the money. How often have you said, “I saved money” because you paid $40 for a $100 pair of shoes at 60% off? What happened to the $60? If you don’t deposit the $60 into a savings instrument, then you haven’t saved anything. What you did was “cost avoidance” and not savings. All savings from canceled subscription services and other austerity mandated changes must be deposited to be real. 
Being able to deal with income and expense volatility successfully requires preparation. The base of that preparation is an emergency fund. Start or grow yours now. 

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    Mansa Musa is a homeownership counselor and homebuyer educator. He is currently the Principal at MoneySmartLife.org. He blogs and speaks on subjects of financial well-being and financial capability. Helping working class families live a sustainable MoneySmartLife through pragmatic solutions and behavior changes.

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  • MoneySmartLife.org and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. 
  • The views, thoughts, and opinions expressed belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual; either in the past or future. 
  • This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.” MoneySmartLife.org states that they’re using this material as part of their “efforts to advance understanding of issues of “financial well-being” and that they believe that this constitutes a “fair use” of the material in accordance with title 17 U.S.C. Section 107. ​
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