The Finance Pirate's Credit Score, February 2009

My credit card company has informed me (with a small message that appears in the corner when I log in to my account) that they will no longer be providing me with my TransUnion credit score for free as of March 1, 2009. Screw them. Providian was nice enough to do it, then Washington Mutual bought them out and they were nice enough to do it. But then JP Morgan Chase bought Washington Mutual and they scoff at providing a great free service like this. They are also reducing the transaction history that you can view online from unlimited to the past three months. Hey guys, wonder why I never use your crappy card?

Anyway, here's where I ended up. Hell yeah.

The Finance Pirate's Credit Score, June 2008

Who wants a pick-me-up? Who wants their day to get a little brighter? Who wants to enjoy a frosty beer and a handful of Doritos with me after work?

That's right, me hearties. 711. That makes me one of the big boys. Even the stodgiest of bankers can't call me subprime now. I forsee more increases in the near future. More to come!

A Couple Quick Investing Tips

This post is going to seem sort of random, because it is.

The first thing I want to say is that this is a great time to get into the stock market or buy a house. "Whaaa?" you say. "Yes!" I say.

Remember the best way to make money in the stock market is to buy low and sell high. Actually, that's the only way to make money in the stock market. And where are stocks right now? That's right, low. Will they go lower? Probably. Can you predict when they will start going up again? No. Nobody can. So all anyone can say for sure is that now is a pretty good time to be investing.

As for real estate - which you shouldn't think of as an investment unless you're using it as one, i.e., renting it out - why is now a good time to buy? Because prices are low! What do you do when you go grocery shopping or clothes shopping (if you're a good Pirate) - look for stuff on sale! Real estate is on sale right now, so it's a great time to buy, if you can afford it. I do think we can safely predict that real estate will continue to decline in the short term, however, so waiting a little longer is not a bad thing. Real estate is a lot harder to buy and sell than stocks, so we say the real estate market is "less liquid" than the stock market. This means less volatility in the prices, so it's easier to spot the bottom. Note I said easier, not easy.

The second thing I wanted to talk about is a little advanced investing advice for those of you who buy and sell individual stocks. This is also a note to myself, almost like I'm thinking out loud.

I subscribe to a service that makes two recommendations each month, and I choose one of them to invest in, or go back to a previous month to catch one I might have missed. My usual method is to choose what I'm going to buy, then put in an order for as many shares as I can afford the day after the recommendations are made. But I'm not going to do this anymore.

From now on, I'm going to keep an eye on the two recommendations for a month or so, and look for either of them to go down (this is likely considering the current market). If one doesn't go down, I'll seriously consider buying it. If both go down or both stay the same, I'll pick the one I like better (just like I have been doing), but I'll be getting it at a better price. If both go up, I'll stop using this strategy :).

As with any investing strategy, it's best to stay flexible, but I think this will provide a good framework. I'll even tell you all about the service I subscribe to (although obviously I can't share the recommendations).

More on Mint soon, I promise. I'm actually beginning to like it.

The Finance Pirate's Credit Score, May 2008

This doesn't reflect my recent payoff of the last of my credit card debt (it might take another month or two)...

... and you can tell, because it's unchanged for 4 months now. We'll see a boost in June or July hopefully.

A Bottle of Rum for Everyone!

Take a gander, me hearties:

That's the last of my credit card debt! I started accumulating that debt in (I believe) September 1997, and it got as high as $17,000 (on multiple cards) before I started paying it off in November 2002. That means it took me about as long to pay it off as it took to accumulate - which is pretty good when you think about it.

And when you also take into account the fact that I bought and paid for a car and managed to put away a nice chunk of change for retirement since November 2002, well... I think I've done pretty well. So there.

Discover's Going on My List

Discover has denied my request for one of their awesome rewards cards. Of course, they had no problem giving me credit in 1995 when I was in college and had no income. So, as threatened, they are going on my list. Those scurvy freakin' dogs.

There is a silver lining in this cloud, however. Whenever you are denied credit, for any reason, you get a free look at your credit report (this is on top of the one free look you get each year from each reporting agency). Since Discover used TransUnion, I went to their website and took a gander. Interestingly, they asked for no verification codes or anything, just my assurance that I had been denied credit, so I wonder if you could do this all the time. I'm just wondering, that's all.

Whenever you look at your credit report, look very carefully for errors. Even a tiny error in a date or amount can be disputed. And if the company doesn't get back to the reporting agency within a certain timeframe (30 days I believe), that item can't appear on your credit report anymore. The last few times I've looked at my TransUnion report, an account that was delinquent way back in the day shows up twice (because the bank changed its name). I dispute it every time. Maybe one of these times they'll remove one or both entries.

If you haven't done so recently, definitely request your free credit report at www.annualcreditreport.com. Dispute anything you see that is inaccurate (and negative - probably not a good idea to dispute a positive item). Cool strategy - there are 3 reporting agencies (TransUnion, Equifax, and Experian), so if you get a report from one of them every 4 months and rotate, you can get a pretty consistent idea of your credit status. Give it a try, and let me know if you dispute an item and win! I'm not sure I've ever seen it happen.

Back to the Plastic

By the middle of June, I should have the last of my credit card debt paid off. It was going to be the end of May, but some unexpected expenses showed up. It will be a glorious day, and happens to be coinciding with a backyard cookout that I am planning, for which I have not yet sent invitations, so do not feel bad if this is the first you're hearing of it.

Now, as we all know, credit card debt is bad. Evil. But credit cards, well, they're actually okay, if you use them right. So when my last payment is sent to Washington Mutual, aka "Wamu", aka "about to go bankrupt from their stupid lending practices", I am going to start using plastic again - knowing that I will pay the balance in full each month. Why? Rewards, baby! Plus, it helps keep things organized.

There are two items in my budget, "discretionary" and "groceries", that are the hardest to control, since they are not fixed bills in any way. I fixed discretionary by having the budgeted amount (adjusted to bi-weekly) direct-deposited from my paycheck to a separate bank account. Every Friday, I take out the weekly budgeted amount at an ATM (one of three ATMs in this state belonging to that bank). That amount is my discretionary money for the week. When I run out, that's it. So discretionary is under control.

For groceries, I'm applying for a new card with generous rewards. Such cards usually have higher interest rates, but since I'm not going to carry a balance, that won't matter. To find a card with generous rewards, I went to Bankrate.com, which has a useful credit card search function. I also asked Karen, who once froze her credit card in a block of ice in her freezer to prevent her from using it. She is also a finance pirate, but please note the use of an indefinite article and lack of capitalization. I'm the captain, and I get to decide these things.

Between Bankrate and Karen, I decided on Discover. Not as many places take Discover as those that take Visa or MasterCard, but my grocery store does. My gas station does as well. And Discover has an awesome rewards program - 5% cash back on gas, travel, and home repair, and up to 1% on everything else. That 5% on gas is nice, so I'm going to use the card for groceries and gas. And you can just get the cash back or use it on Discover's online store and get even more discounts. But I don't want this to sound like a Discover ad.

Anyway, with my credit score above 700, I should get the card, though they weren't able to give me an instant decision (I've never gotten one of those, but I dream of the day I will). When I get it, I will dance a little jig. If I don't get it, Discover's going on my list.

Emergency Expenditures

Remember how I said that instead of saving our tax rebates, we should use them to pay down debt or invest? And remember how I was going to use mine to pay down my credit card debt?

Yeah, not anymore.

One of my tires went flat last week, and since all four were getting near the end of their tread worthiness, I bought new ones. A new set of 4 tires, plus installation and balancing and all that, set me back $500. Ouch.

Then two days later, I left my headlights on all night. I called for someone to come by and give me a jump, and it turns out I needed a new battery (batteries last about 4 years, and this one has lasted about that long). That was another $100.

So there goes my $600 tax rebate! But you know, do as I say and not as I do - use yours for paying down debt or investing. This illustrates the importance of having an emergency fund anyway, which is today's topic. Let's discuss:

Make sure you have an emergency fund.

That's it. Oh, you want specifics?

The various financial experts that I read say you should have 6 to 12 months of expenses socked away in an account that is easy enough to access in an emergency, but not so easy that you're tempted to withdraw money from it for a whimsical purchase. I don't know exactly how you would strike a balance that delicate, so all I can say is just make sure you have the discipline not to touch your emergency fund unless it's, you know, an emergency.

In my case, since I'm still paying off the aforementioned credit card, I do not have an emergency fund (other than trying to keep at least $1000 in my savings account - but that is not nearly 6 months of expenses). I think this is a good way to prioritize, because by paying down the balance on my credit card, it increases the available credit, and that available credit will be my emergency fund until I actually have a real emergency fund. By that rationale, you may already have an emergency fund in the form of available credit on your credit card(s). But what we want to do is move that emergency fund gradually away from your plastic and into a savings account. That is what I'll begin to do after my credit card is paid off.

How hard is it to save for retirement, pay down debt, and build an emergency savings cushion all at the same time? Very hard, but it can be done. How do you prioritize them? Check out my post "Get Your Priorites Straight" from last year, and pay specific attention to the "Hi-Lo Method," which I was never able to find a better name for.

It turns out that by the time I get my tax rebate check (actually direct deposit), I will have rebuilt that $1000 cushion in my savings account, so I'll be able to forward the $600 straight to my credit card as I had originally planned. So it's all good.

Also, a tip: I belong to AAA because I get a discount on my car insurance. When my tire went flat, they sent a guy to change my tire, and he inflated the spare to the correct pressure, something I could not have done if I had changed the tire myself. And when my battery went dead, a guy came by to check my battery, told me it was very dead, and installed a new one for me on the spot. I got a discount on the battery, and the labor in both cases was free. Single membership for me is $58 a year, and it pays for itself with the discount I get on my insurance. I highly recommend you get it too.

As always, e-mail me and tell me your story.

Stimulate This, Ye Scurvy Dogs

Sometime in the next couple months, you might be getting a check in the mail, or a direct deposit in your bank account, from Uncle Sam. Check here for a schedule to figure out when you should expect your check.

The Recovery Rebates and Economic Stimulus for the American People Act of 2008 seems like a grand gesture from Congress, but remember: it was already your money. And unless they find a way to pay for it, you or your descendants will just have to pay it back, plus interest, to the people who hold Treasury bonds. This is not free money.

Let's pretend it is though. The idea behind the stimulus rebate is to get people to spend the money at a store, so the store will place more orders from the factory, and the factories will make more widgets, and the owners will hire more people to work in the factory. This is capitalism broken down to a level of simplification that would stop Adam Smith's heart if he were alive today, and if spending the last 200 years buried alive hadn't already stopped his heart.

But I think this just perpetuates the over-consumption that got us into this mess in the first place. Our economy runs on over-consumption, and the problem lately is that we don't have enough money to keep up with the level of consumption we've had for the last 25 years or so. The solution the politicians have come up with is to give us money so we can continue living beyond our means. But that's a feel-good solution that won't do anything in the long run (except we'll have more singing fish hanging on our walls). The solution that actually corrects the problem is to let the economy adjust to a new, more realistic, level of consumption. We spend more than we earn, and we've been funding the difference with debt - using home equity and credit cards at the personal level, and Chinese-held bonds at the government level. We can't keep doing the same thing, hoping the outcome will change. That is the very definition of insanity.

If I may, I'd like to use an analogy here that will shed a little light, and will also offer additional commentary on gas prices, which I've written about before. I like to call this method of tying things together "Sheer Genius".

Our economy up to this point has been like a gas guzzling SUV. Up until recently, we could keep driving all we wanted because gas was cheap and plentiful. Now, all of a sudden, gas supply is drying up, and it's becoming more expensive. Now, if you ask John McCain or Hillary Clinton, they would say that in order to keep the economy rolling, we should artificially lower the price of gas (by suspending the 18 cent a gallon gas tax) so we can continue driving our gas-guzzling beast. In the meantime, we keep turning a blind eye to the reality that gas prices are going to continue to go up, supplies are going to continue to dwindle, and the CO₂ levels in our atmosphere are going to keep skyrocketing.

That solution is beyond stupid. More than doing nothing at all, it will only make things worse. Reduce our dependence on oil by using more oil? Fie, I say! Fie!

What's the Finance Pirate way of solving this little conundrum? Simple - adjust our lives so that we use less gas. Boom - we save money by not buying as much gas. We save money because our cars last longer. We don't have to rely (as much) on questionable foreign governments to supply our oil. We help the environment by not adding as much CO₂ to the atmosphere. And you know what? Just as an added bit of irony, because we use less gas, the price ends up going down anyway.

The same goes for this rebate check most of us are getting. I'm not saying that you should turn down the money and send it back; I'm saying you should use the money wisely - use it to pay down debt or save.

Now, the government doesn't want you to use your stimulus for paying down debt or saving. They want you to spend your money now, in today's economy. They want you to spend it on Stuff®. If you pay down debt, you're just paying back money spent in yesterday's economy. And if you save the money, you're going to spend it in tomorrow's economy. This is better for us in the long-term, but it means we have to tighten our belts a bit in the short-term. But the irony hits us again: with less debt and more savings, the economy will get better anyway. We just need to learn to live on a little less. Continuing to spend more than we earn, and funding our economy with ever-increasing debt, is like continuing to drive a gas hog while complaining about gas prices - stupid and destructive.

My check is going to pay off what will hopefully be the last $600 on my credit card balance, which was once as high as $17,000. How are you spending your stimulus check?

The Finance Pirate's Credit Score, April 2008

I'll update you on my adventure with Mint later, but for now, here is my credit score, provided for free on my credit card's website:

Unchanged again. Well I'll show them. I hope to have the last of my credit card balance paid off next month (using my tax rebate stimulus doohickey).

Which gives me an idea for a short post. Coming up...