Gang Aft Agley.

I've been more or less okay with my holiday spending thus far, and the last gift I'm going to purchase will be relatively small. So I was feeling fine with splurging and buying the pre-packaged fruit tray for our office holiday party.

Shortly after I got home from the store, my brother called. "I've been having trouble finding things for Dad. And I wanted a good birthday gift. [Dad was born on Christmas, so we make an extra effort to find him something special every year. ] So before I knew it I bought him two Billy Joel tickets. "

And so I told him to forget about giving me the $20 for another shared gift I'd ordered, and will be writing him a check to cover some more of the ticket expense. He recently had to buy a new car, so I don't want him to shoulder all of that himself.

It's a good thing I didn't have to travel this year, that's all I have to say.

Belated links and lemmingdom.

Thanks to Penny Nickel at Money and Values for hosting the recent Festival of Under 30 Finances. I'm included, along with many other interesting posts. If you haven't already checked it out, stop by.

That "5 things you may not know about me" meme is also going around. And I don't mind an excuse to talk about myself, so I will ignore the tagging part and encourage anyone who wants to join in to do so.

1) HC does not represent my initials. If you can figure out why I use that as my nom de blog, then I'll give you a cookie if we should ever meet in person.
2) Although it has been over a decade since they were released, I can still sing nearly every word of the Afghan Whigs' Gentlemen and Liz Phair's Exile in Guyville. Any correlation this may or may not have with my romantic history is left as an exercise for the reader. [grin]
3) I had the opportunity to live in Japan for two years after college as part of the JET program. I decided not to go. Some people would regret this, but I think it is one of the best decisions I have ever made.
4) I've eaten a lot of good food in a lot of fine locations, but thoughts of this place still make my mouth water.
5) I have not had a proper vacation this entire year, and am looking forward to 11 days away from work like you would not believe. It starts this Friday!

Apply for your FAFSA PIN today!

If you are planning on requesting financial aid for the 2007-2008 school year, you can submit the Free Application for Federal Student Aid as early as January 1. Most states do not have FAFSA deadlines before March 1, but financial aid officers generally recommend filing as quickly as possible. (In many cases, those officers also recommend filing with estimated 2006 tax information in January and filing a corrected application after tax returns are complete.)

To begin, visit FAFSA on the Web to download a list of necessary documents and to apply for a PIN. Parents must also apply for a PIN unless the student does not have to provide parental information (because the student is a) older than 23, b) persuing a graduate degree, c) married, d) responsible for his/her own dependents, e) serving in, or a veteran of, the armed forces).

It can take up to 10 business days to receive a PIN by mail (although only 3 via email), so it's best to get it out of the way now.

If you or your student is also planning on applying to schools that require the PROFILE, now would be a good time to register for that as well. In this case, students and parents can use the same login to complete the application.

How I Gave Myself a Learner's Permit for My Credit Cards

I've never paid a finance charge on a credit card. With the exception of hiring a moving truck two and a half years ago, I've never exceeded 50 percent of my credit limit. I've never been in the position of wondering how I would pay my card off.

I'm not trying to brag. I've just noticed that there are plenty of advocates for never using a credit card and then there are those who snatch up every balance transfer opportunity in sight. And it seems to me that part of the issue is that getting a credit card is a bright-line, instant change that doesn't come with much (or any) training.

Compare that to learning to drive. Driving offers convenience and independence, much like credit cards. And it also involves a lot of risks, even MORE so than credit cards. Because of this, most states require that young drivers complete graduated licensing programs, which insure that they are supervised for months while learning how a large, heavy vehicle works.

So I set up my own "graduated credit" program. I really went full scale AFTER I graduated from college, but this is easily applicable to college students.

Step 1: Use a bank or credit union debit card for every possible transaction for one year, but remain an authorized user on another credit account. Groceries, drugstore items, bus tokens, etc. Any point-of-sale transaction should be paid for via debit. Some people are advocates of doing all spending with cash. That's admirable, but the point is to teach yourself how to keep track of your funds while using a little plastic card. I recommend that you choose a bank that lets you keep track of all your transactions online (although I'm hard pressed to think of one that DOESN'T, nowadays.) You may consider a budget tracking program for this as well.

The only exceptions are 1) cash for restaurants and bars. You'll probably be going out with other people and putting in cash is easier. And you don't have to worry about your card being skimmed. Just remember that you made these purchases. 2) Major consumer purchases and all online purchases. Despite my fondness for debit cards, they do NOT offer the same protection as credit cards, and anyone who tells you otherwise is confused or deliberately misleading. You'll need extra help while you stick to your debit-only plan. In my case, I was an authorized user on my father's credit card, and was able to use it to reserve plane tickets for trips home. (I'd then try to pay him back as he waved me off, but that's another issue.) I didn't buy any other big-ticket items that year, but if I had, I would also have wanted the consumer dispute protection of a credit card.

If you cannot find someone to authorize you on a card, get a second bank account with another debit card. Transfer funds to this account for your online purchases. Should your card information be compromised, you don't have to worry about your main checking account being hacked. You should also put all money for plane ticket and other large purchases here for the same reason. Alternatively, you may be able to convince your family to make reservations on your behalf and to pay them back later.

Step 2: Evaluate after six months.

Have you ever lost track of your spending? Did you have to dip into savings for anything other than real emergencies? Have you been hit with any overdraft charges? If the answer to any of these is "yes," you probably need to refine your budgeting and tracking skills. If you haven't used a budgeting program, or you don't like the one that you currently have, consider trying a new one. Follow step 1 again for another six months. And remember, whatever problems you have dealing with debit cards will only be exacerbated when dealing with credit cards.

Step 3: After six successful months with a debit card, get a relatively low-limit credit card from your bank or credit union.

Why would I recommend a bank credit card when the rates will probably be higher than other offers you might find? 1) If you already have a financial relationship with your bank, they'll be more willing to issue you a card. They know where your funds are. 2) You'll probably be able to keep track of your card balance on the same web page as your other accounts with the bank. If you can't, look around until you find a financial institution that has that setup. You want to see your credit transactions every time you log in, so that your spending can't get away from you.

I recommend that you avoid a huge credit limit off the bat. On the other hand, the lower the limit, the worse your utilization ratio will be for purchasing anything more than sticks of gum. I had roughly a $1500 credit limit when I first applied, which was less than 4 percent of my annual income at the time. Under $2000 is likely to keep you from getting into too much trouble if you start running up charges.

Continue to use your debit card for the majority of your purchases. Keep the credit card for small recurring purchases (a newspaper subscription or somesuch) and the aforementioned plane tickets and online purchases. If you find yourself spending more on your credit card than you did with your debit card, take a break, evaluate your budget, and rein in your spending.

Step 4: Again, evaluate after six months.

Were you able to pay off your bill in full every month? Did you usually stay below 30 percent of your credit limit? Do you trust yourself when you take out this card?

If the answer to these is "no," then put the card aside for awhile, and go back to the debit. Do not close the card, but lock it away and pay down your remaining debt. You can try using the card again AFTER you pay down your credit balance in full. Evaluate again after another six months. Continue using your debit and SINGLE credit card for a year.

Step 5: After a year of responsible credit card usage, look into rewards cards or zero percent cards.

These offers provide even more convenience than normal credit cards, which is why they are risky. However, if you know that you can pay your balance off in full by the time the statement is due (or the promotion period, in the case of zero percent cards), then you can take advantage of these with confidence. Remember that opening a lot of new cards can ping your credit score, however. I think waiting a year or two and then searching for better offers is fine, as long as you can continue to keep track of your old cards.

So, that's how I graduated from debit-only to regular use of cards without getting in over my head. I don't claim that this will work for EVERYONE, but I suspect it might help some young people who feel overwhelmed.

Help solve my dilemma!

Really, it's not a bad one to have. But since I need to make a decision by January, advice would be appreciated.

I'm paid biweekly, but my budget is based on two pay periods per month. So twice a year (usually January and July), I receive an "extra" pay deposit. This allows me to pay off any charges accrued for Christmas or for my summer trip (that aren't covered by my holiday savings subaccount), and to do my semiannual wardrobe shopping. Most importantly, however, I take a big chunk and put it towards my finances.

In the past, it's been a no-brainer. I'd make an extra loan payment on my high-interest student loan. Now that I've refinanced that loan, I feel like I have more options.

Option 1: Make an extra payment on my credit union loan. It's a 5.9 % APR, and interest is not tax-deductible. If I continued to do this twice a year for the remainder of the term, I would shorten this loan by two months and reduce my interest by $180 or so.

Option 2: Make an extra payment on my Perkins loan. 5%, interest is tax-deductible (although for 2007, this won't be relevant). Continued extra payments would shorten this loan by 38 months and reduce my interest by over $250.

Option 3: Make an extra contribution to my emergency fund. 4.6% APY. I've already earmarked my net bonus to refill my fund, and expect a tax refund between $100 and $200 (despite increasing my withholding) that I also intend to deposit here. And I continue to make regular contributions to this fund. This is my least favorite choice.

Option 4: Make an extra contribution to my downpayment fund. 5.05% APY. This would certainly boost my savings toward my condo downpayment. I'm really leaning toward this option. However, since I'm not planning on meeting with a broker until January, I might be getting ahead of myself.

I do have a few other options (pay towards my lowest-interest rate student loan, set up a car fund, etc.), but these four are the ones that make the most sense to me.

What would you do?

December Net Worth

While I’ve been keeping track of my net worth since March, I haven’t published anything about it. I didn’t want to publish the hard numbers. However, I realized that Excel formatting can “blank out” the balances and leave the percentages, so I give you the colorful statement here. (I use the Excel net worth calculator, and that’s the scheme that they use. [shrug]) As-of dates are the 2^nd of the month.

Personal Items

The Kelley Blue Book value of my car stayed the same this month. I take an additional 5 percent or so from the “fair condition” value, to account for accidents the car has had (albeit completely repaired every time). I should probably have a real depreciation schedule for my computer, but instead I just shave $50 of the value off every three months. My other personal items are estimated at under $500, so I rarely retool those numbers.

(For the record, I value these possessions in my net worth because I COULD presumably sell them in an emergency. I take public transportation to work, and I live in a well-served area for car sharing, so selling my car is not so far-fetched. In a real emergency, I could move in with family members in the area, and that would probably involve selling some of my personal possessions. And while I wouldn’t give it up in an emergency, I also expect that I will eventually (4-6 years) purchase a new computer, in which case I would sell or donate my current one.)

Cash or Cash Equivalent

My checking account balance looks better than it “should” because a withdrawal that normally occurs on the 1^st or 2^nd was transmitted to my bank, but didn’t clear until this morning. Even so, my balance is slightly higher than last month. Savings had a sharp withdrawal this month partly because my November number was “inflated.” I received some checks to cover my family’s tickets for [Famous Performing Troupe] and hadn’t sent them to the credit card yet. I also had to pull some additional savings money to cover my plane ticket for Thanksgiving. My online savings accounts are up some from the big drop; I adjusted my withholding last month in order to refill my emergency fund after paying for the car repairs.

Investments

This improvement is basically all due to the run-up in the stock market (rising tides, etc.) But I expect my higher retirement contributions (thanks to my raise and now-10-percent allotment) will somewhat offset any drops occurring in December.

Loan Balances

My student loans improved even more than I expected because one payment posted on the 1^st that normally posts after I finish my updates. My “other loan” is the private educational loan I transferred to my credit union. I’m still so pleased to actually see principal being retired on what used to be my biggest burden.

Other Debt

I pay my credit card statement balances in full every month. I have another gift purchase I’m being reimbursed for, which will take my balance on one card down to zero. The other is a bit higher than normal due to some Christmas shopping, but will be statement-paid this month and probably paid to zero in January.

All told, my net worth improved 4.9 percent this month. I think I can live with that.

Giving on the brain.

It seems like the season is upon us, so everyone has been talking about charity. How much to give, where to give, and DEFINITELY who gives.

NCN asked about bloggers' favorite charities. I have three or four that I regularly fund, but my favorite is Americares. The disaster relief/humanitarian aid organization is well rated, efficient, and committed to providing aid "for all people around the world, irrespective of race, creed or political persuasion." It gets the majority of my continuing donations every year.

Tired But Happy asked about making donations at the office. I do the majority of my financial giving through my office campaign. We're given a very large database of charities from which to choose, covering pretty much any cause one could imagine. The database also lists each charity's allocation to program expenses, rather than administrative/fundraising ones. And since my donations are made every pay period, I don't have to worry about falling short and failing to donate. I also make lump sum donations to a few organizations througout the year, either to support a friend's fundraising effort, or in response to a disaster. But if I get an unwanted solicitation, I simply say that "I do my giving through XYZ Campaign." It's true, after all. My long-term goal is to up my giving percentage every year as my student loan debt decreases.

And finally, I do volunteer. I have a weekly commitment with Catholic Charities/Catholic Community Services as a GED/External Diploma math tutor. And I do periodic projects with my county's homeless association. Writing this post did make me realize that I've been a very bad blood donor (as a type O, I should go every time) over the past several months since I can't rely on workplace donations anymore; our "workplace" donation site is a mile away. And being sick didn't help. Now that I'm better, I signed up to go to the standing Red Cross center next week.

I guess blogging about these things really CAN change behavior!