I’ve written a lot about using a cash back credit card to earn some money back on your everyday spending. But it isn’t very smart to use a rewards credit card when you’re struggling with credit card debt.
Think about the 1 or 2 percent you’ll earn on your spending versus the 19 or 20 percent interest you’ll be charged if you don’t pay off your balance in full. Not a good idea!
So if you’ve got credit card debt that you’re determined to pay off quickly, you’ll want the lowest interest rate possible.
For example, say you carry a balance of $5,000 on your credit card at the standard 19.99% interest. By switching to a credit card with 0% interest for 12 months, you’ll save $1,000 in interest charges.
Switch and Save
Right now, Rate Supermarket has a promotion where you can get a $100 gift card to Amazon.ca, Future Shop, Boston Pizza or Starbucks when you sign up for the MBNA Platinum Plus MasterCard or the MBNA Smart Cash MasterCard.
The promotion is called switch and save. See how much you can save by paying down your credit card debt interest free for a year with Platinum Plus, or by boosting your credit card rewards with Smart Cash. Sign up for this offer here.
Now let’s take a look at some great articles from around the web this week:
From the major media
- Dianne Nice from the Globe and Mail writes about why we hate redeeming reward miles
- Jason Heath at the Financial Post says young people are becoming more financially savvy
- Adam Mayers from the Toronto Star looks at tax free savings over-contributions
- Jon Chevreau at MoneySense writes about the days after Findependence Day
From the blogs
- Free From Broke asks is telecommuting bad for a company, and looks at Yahoo’s decision to ban it
- Timeless Finance wonders if you would date somebody who’s in debt?
- Young And Thrifty lists 5 benefits of separate chequing accounts
- Andrew at She Thinks I’m Cheap sold RioCan and Shoppers Drug Mart shares
- My Own Advisor looks at some equities built to last in your portfolio
- Canadian Couch Potato explains why you should avoid DRIPs in taxable accounts
- The Passive Income Earner looks at the Smith Manoeuvre and when you should consider it
- Retire Happy Blog explains the difference between marginal tax and average tax
- Canadian Finance Blog asks how much of your money is actually being invested?
- Financial Uproar wonders why the PC Financial free chequing account doesn’t get more love?
Have a great weekend, everyone!
When I recently received my homeowners insurance renewal documents, included was a letter explaining why the rate was increased. It stated how “severe catastrophic events worldwide continues to be a leading cause of loss for insurance companies,” blah, blah, blah.
“So what” I thought, “I don’t live in a hurricane/earthquake/tsunami prone area. What does this have to do with me?”
Related: How Prepared Are You If A Disaster Strikes?
Often with huge increases our first instinct is to start shopping around at other insurance companies. While it’s not a bad idea to compare rates, you should first review your coverage with your existing company. Many times they’ll offer discounts for long term loyal customers.
How I Saved On House Insurance
By spending about twenty minutes on hold with my insurance provider (while working on a couple of on-line jigsaw puzzles) and discussing the policy with the helpful agent I saved over $300 on my house insurance – ka-ching! – and, as an added bonus, I saved almost $50 on the car insurance.
Well worth my time and effort. Here’s how I did it:
Update your information
The first thing I noticed was the replacement value of the house was about $100,000 too high. The amount should be the cost to rebuild – not the market price. Don’t include the land value.
Next showed the age of the roof and heating to be 33 years (the age of the house). The roof, furnace and hot water heater were upgraded within the past five years. They also gave credit for the carbon monoxide detector.
Related: ecoEnergy Retrofit Program
Other changes that could affect your premiums are:
- Getting married (except Nova Scotia)
- Improved credit score
- If you’ve stopped smoking
- If you’ve lived at the same residence for a certain number of years
- Impact and fire resistant roofing
- Taking in boarders
- Having a business on the premises
The agent even asked me if I still had three cats. I don’t know the relevance of this, though – I forgot to ask.
Don’t under-insure
One mistake made to reduce costs is to under-insure. Make sure you take replacement value for your furniture and belongings. If you live in an area exposed to certain risks – hail is a big one where I live – make sure you pay the extra premium.
The extra $15 we paid each year for water damage coverage was especially appreciated when our basement flooded a few years ago and everything was rebuilt and/or replaced.
Purchase special endorsements to cover the full value of expensive jewelry, artwork, antiques etc. as these are subject to coverage limits on the standard house insurance policy.
If you have a lot of add-ons that increase your total you can offset part of the cost by raising your deductible to $500 or $1000.
Have sufficient savings in your emergency account to pay it. Most homeowners have very few claims. I’ve had only two claims in over 35 years.
Often with a large claim – like my flood – deductible amounts are not even charged.
Final thoughts
Homeowners buy insurance to protect against disaster. But when disaster strikes your insurer might not live up to your expectations, especially if you have a large claim.
Make sure you read your policy every year to see what is included, and how much is covered. New discounts could apply to your new life situation if it has changed. Only pay for what you need, but don’t under-insure.
Related: How Much House Can I Afford?
Switch insurance providers if you can get a better price, but if you choose to stay with the same provider, be willing to negotiate. Go with the product that’s best suited to your needs at a price you can afford.
Maybe it’s because I work in technology but I’ve never thought of tablet computers and 3D TV’s as status symbols in today’s world. According to this article from the UK’s Dailymail these symbols have changed significantly from 20 years ago.
It might have been enough to own a house with a 2 car garage and take a vacation once a year before, now however there are many more “must have” items for those wanting to show their success.
While it’s natural for people to seek status symbols, spending beyond their means to acquire them is what leads to problems down the road. Setting your expectations too high too early in life is how people can end up buried under piles of debt.
Related: Why Do We Save?
Here are a few items from the list that particularly peaked my interest:
- A smartphone
- An iPad or Tablet
- A smart TV or 3D TV
- A dog walker
- A cleaner
- A nanny
- Personal number plate
- Champagne in the fridge
- A holiday in the Caribbean, Maldives or Seychelles which costs $7,500
Electronic Gadgets
When you take away the carrier subsidies, smartphones are quite expensive with an unlocked iPhone starting at $789 ($699 plus tax).
For the married men out there that like to have the latest and greatest phone, just remember that you can’t give your wife a hard time for wanting to buy an expensive hand bag after you’ve spent $800+ on a phone!
Related: The Cost Of Keeping Up With The iPhone
Thinking back 10-20 years, would “a Computer” have been on this list instead of an iPad/Tablet?
Desktop PCs and laptops are basically commodities these days with the price of entry as little as $400, while a decent PC bought in the 90’s would have cost $5,000!
The big difference between computers of yesteryear and smart phones, 3D TVs and tablets of today is the cool factor. 15 years ago your desktop PC would be locked away in an office somewhere, but these new gadgets are highly visible.
Outsourced labour
The next three prestige symbols I listed are services which many might not have thought of as status symbols before.
Dog walkers, cleaners and nannies have become status symbols over the last few decades as more and more women have entered the workforce and commute times have gotten longer.
Related: Is A Long Commute Time Destroying Your Job Satisfaction?
The less time you have, the more important these services become which then turns them into prestige services.
What’s interesting is that if you have a small home that doesn’t require a lot of cleaning, you wouldn’t associate the same level of prestige with having a cleaner as someone who has a large home who never has enough time to clean it!
This means that in many cases, status and prestige are relative.
Personalized plates
It’s funny that personalized license plates made it into this list. Since the cost of getting your own plate is fairly reasonable ($250) given the length of time you’ll use it, I suppose the level of prestige associated with this item speaks more to the message that someone puts on it or the car they put it on.
People might be more likely to put a personalized plate on an expensive car with a message like “GR8 CAR”. Sorry I couldn’t come up with something more creative.
Who actually has champagne in the fridge?
I think this is probably a better indicator of status than a smart phone. There are thousands of people roaming around talking on their iPhones and I can almost guarantee you that none of them has a bottle of Dom Perignon in the fridge!
Travel to far off lands
I found the last item, travel, particularly interesting for a couple of reasons.
First, given that this is an article from a British newspaper, it’s worth noting that destinations like France, Italy, Spain and Greece are not on the list. If Canadians were asked to come up with a similar list, one or more of those destinations would be on there!
Related: Using A NEXUS Card To Cross The Border
This means that the status associated with a trip is really a factor of distance. For Canadians, a trip to the Caribbean is fairly common so we wouldn’t associate the same level of status with a visit to Cuba as the English would.
Secondly, the researchers specifically note that the trip has to cost at least $7,500 in order to have an impact. To me, a trip is a trip whether you spend $3,000 or $7,500.
This distinction must reflect the exclusiveness of a hotel or resort (meaning more $$) for determining status.
It’s only a status symbol if you believe it is
Building on the house cleaner example earlier, things or services only become a status symbol when you actually believe that they are. By managing our expectations we can actually reduce the desire to purchase such items.
It’s ironic to think that the fewer prestige symbols we buy, the more wealth we can build!
Andrew Martin is a personal finance and investing blogger from Toronto, Ontario with a background in technology and a passion for travel. His blog, She Thinks I’m Cheap aims to help Canadians build wealth by sharing facts, stories and advice.