For various reasons I have four credit cards. I always thought of this as too many, but haven't cancelled mine since the crappiest one is also the oldest, and has no fee, and I want to maintain the age of the card on my credit report. Most people I know have one or two cards. But reading online forums on credit, I see plenty of people with more than four. How many is normal? How many do you have?
The average person carries eleven "credit vehicles." Typically, seven are different types of cards and four are installment loans for cars, furniture, student loans or mortgages.
I heard recently that the average number of credit accounts was 12.7 per person, which is slightly higher than Bankrate's numbers indicate. The numbers I heard are closer to the average credit statistics at myfico.com:
On average, today's consumer has a total of thirteen credit obligations on record at a credit bureau. These include credit cards (such as department store charge cards, gas cards, or bank cards) and installment loans (auto loans, mortgage loans, student loans, etc.). Not included are savings and checking accounts (typically not reported to a credit bureau). Of these thirteen credit obligations, nine are likely to be credit cards and four are likely to be installment loans.
Perhaps of more interest to some readers, Nellie Mae has statistics from the year 2000 about student credit card use. Undergrads carry about three credit cards each and graduate students carry about four credit cards each. The credit trap begins early.
Myfico.com also offers information about average debt load:
Every year I try to review the steps in Your Money or Your Life to see how we're doing. It's been about two years since my last review, but much to my delight, I found we are following most of the steps well, and I just needed to update some numbers.
Step 1: Making Peace With The Past
A: Determine your total lifetime earnings
The book was written before the Social Security Administration started sending out statements. If you have earned income all your life through regular jobs, this is extremely handy. I needed the numbers from my last review in 2004, Social Security statements, and our last tax return. The combined number for me and the Spousal Unit: $865,872.
B: Determine your net worth
So what do we have to show for all that moolah? Often, this is a depressing part of the assessment. Until recently, I came up in the negative, which is fairly common. For the last review, my net worth was a whopping $2,869. So. Add up assets: I include anything in the house that I could sell for cash, all bank accounts, current market value on the house, investments, etc. $316,183. Now for liabilities: the balance on the house, any other loans or credit card balances, and a tax debt from being a goob last year: $231,690. Net worth: $84,473. Hey! That's not entirely bad. I can tell you this: most of that increase is because we stopped throwing money away on rent and bought a house.
Throughout our lives we encounter situations where we need to acquire new skills. Sometimes it's nice to have a method for acquiring the basics quickly. Paul's Tips has a technique for learning difficult subjects quickly.
Here's a strategy I've found useful for learning dry and difficult material quickly. At various times, I've used it to build up my knowledge of subjects like economics, investing, writing and computer programming languages. Some people have been surprised at how fast I can learn these kinds of skills, but I think anyone can do it with the right plan. Of course, you can use this to teach yourself interesting things as well, but most people don't have any problem learning stuff that's fun.
Just finished David Bach's Start Late, Finish Rich. At 42, I thought it would be a good intro to Bach's many treatises on personal finance. I'll come right out and say I highly recommend this book. It was full of great information, and took an optimistic, yet realistic tone. I'll try to touch on some key points.
Yes, because you started late, you are going to have to work twice as hard to put away some cash for later, but there are ways to make it less painful. Look at your every day expenditures. Is there something simple you can do without? He calls this the "Latte Factor", because so many of us spend a few bucks a day on fancy coffee. My personal Latte Factor is buying lunch and snacks, instead of bringing them from home. I can spend up to $12 a day on soda, breakfast, lunch, etc. I've cut that down to once or twice a week, and it's making a big difference. Not to mention the fact that my own meals are more healthy and delicious than anything I can buy.
Credit cards: it's the interest. Bach gives instructions on how you can call your credit card company and get them to lower yours, or how to transfer your balance to a card with a no-interest introductory offer, and make a big dent in the debt before fees and interest kick in. That last idea is a particular winner. Imagine you have $3000 credit card debt, at 18% interest. Your minimum payment is $50/month (always pay more than the minimum! But for this exercise, we'll stick to it). At the end of the year, your debt is $2940. Yes, you've just been paying interest. On the other hand, if you transfer to a card that offers no interest for a year (and don't forget to cancel that first card!), and make those same $50, at the end of the year your debt is reduced by an additional $540. Maybe it's time to take a closer look at those ubiquitous credit card offers.
Community colleges are an oft-overlooked resource for cheap education. They offer classes from trained professionals and provide access to expensive equipment that you otherwise would never be able to use. I love community college for several of reasons:
- Affordability — Community college classes are affordable. Despite recent tuition increases, a class at Portland Community College costs about $200. Community education courses (non-credit classes) cost even less. Some employers will pay for classes; my business will pay for one class per employee per term. If your employer doesn't have a similar policy, ask!
- Facilities — Community colleges have facilities and practical training unavailable at most universities. My local community college has a wood shop, an automotive shop, and quality darkrooms. Many students take classes simply for access to the facilities. A typical woodworking class is self-directed — you decide what your project is, and then have open access to expensive equipment and an instructor willing to help you use it.
- Instructors — Community college classes are generally taught by real professionals from the field. When I learned computer programming, my classes were taught by instructors who wrote code every day for actual employers. (One of my instructors also taught at Portland State University — she taught the exact same courses at Portland Community College for a quarter the cost.) When I take photography classes, I'm being taught by active professional photographers. One of my writing instructors was Craig Lesley, a prominent Northwest author.
- Networking — Community college classes allow you to network with instructors and students, making valuable contacts in your hobby or profession. I took photography classes at the community college for a couple of years, and the contacts I made in these classes continue to benefit me: I can e-mail my former instructors with questions and ideas; I trade photography equipment with other students; I get to watch as certain students make the leap from amateur to professional. I'm currently in a writers group with a former instructor. Some students land jobs through the contacts they make in class.
- Convenience — Community colleges are aware that they serve a large population of students seeking continuing education. They try to make their classes as convenient as possible. I've taken night classes in computer science, writing, photography, algebra, Spanish, and business management. I've taken weekend classes in application design. I've taken late-afternoon classes in assembly language programming. Community colleges make it easy to get additional education.
- Education — Most importantly, community colleges act as a safety net for those who need an education. Some kids aren't ready for high school. Others aren't ready for college. Community colleges are there to help those who have realized the value of an education and are looking to correct mistakes they've made in the past. Even adults in mid-career can use community college courses to change their focus. After eighteen months of community college computer programming courses, I landed a job hacking C++ for an environmental engineer.
When I was in high school, I made fun of the local community college. You'd never catch me going to such a place. No, instead I went to a fancy private institution where yearly tuition cost as much as a nice car. And while I was earning my degree from this fancy private institution (which I love, by the way — don't get me wrong), I made fun of the local community college. That was a place for losers. I'm older now, and wiser.
Over the past fifteen years I've attended a score of community college courses. Only one (small business management) has been a dud. Oftentimes on AskMetafilter, a user will post a question like "How can I improve my photography skills?" or "I want to get better at programming for cheap" or "What's a good way to learn woodworking?" My answer is always: sign up for a class at the community college.
Good sleep is one of the best free investments you can make in yourself. I spent much of last year on a quest for improved sleep, and eventually found it. Here's how.
In The Owner's Manual for the Brain, Pierce J. Howard summarizes sleep research with the following lists:
To get to sleep more quickly:
- Consume dairy products (the warmer the better).
- Avoid artificial sweeteners.
- Avoid food additives.
- Avoid caffeine within six hours of bedtime.
- Keep to a regular bedtime.
- Consume carbohydrates and fats; avoid protein.
- Read or view unexciting material.
- Avoid exercise within four hours of bedtime.
- Sleep in absolute darkness and complete silence.
- Take melatonin.
To get better quality sleep:
- Lose weight.
- Avoid alcohol within four hours of bedtime.
- Drink water after alcohol consumption.
- Plan sleep according to sleep cycles and circadian rhythms.
- Do aerobic exercise regularly, but not close to bedtime.
To get back to sleep after waking:
- Write down what's on your mind.
- Read something unexciting.
- Drink warm milk and honey.
Some of these concepts merit further discussion. (Note: while most of what follows is in my own words, some sentences are lifted verbatim from Howard's book.)
In the middle of December I received a bill for $5.30 from Sprint. There's nothing remarkable about this except that I've never had a Sprint account! I immediately called the customer service phone number on the bill. It only took a few moments to reach a live operator. "There must be some mistake," I told her. "Why am I receiving this bill?"
The operator tried to explain. "Well, sir, the Federal government recently approved a monthly fee for certain types of accounts." Notice how this phrasing is meant to make you believe the government is levying this fee.
"No," I said. "I don't care about all that. I mean why am I receiving this bill? I don't have a Sprint account. I don't think I ever have."
This is the first in a series of practical examples of how people put frugal notions to use in real-life.
I often claim that the back porch is "my favorite room in the house". It's true. This is partly because it's situated at the home's northeast corner, which is perfect for Portland weather. But mostly I love this place because I've been able to furnish it cheaply and effectively.
This is a self-portrait I took this afternoon, as I convalesced from the flu.
When we bought the house, I paid the former owners $20 cash to keep the chair on the left. It's a perfect chair to sit in and chat. It's handsome and comfortable, if a little old. The wooden stump, which makes an excellent footstool, was a gift from a friend. It can also serve as extra seating.
I bought the endtable for $5 from a garage sale. It's old and it's ugly, but it's perfect for the back porch. There's a drawer (for matches and pipe tobacco) and a lower shelf (for magazines and trashy novels).
The chair in which I'm sitting was a $20 purchase from craigslist. The summer we bought the house, my wife and I became craigslist junkies. We bought several large mirrors, a desk, a metal cabinet, a futon, and this chair. It's a monstrosity: all wood and spring. The cushions are nothing but foam wrapped in pillow cases. But it's damn comfortable. I keep a $3 Goodwill blanket draped over the chair because it has also become a favorite for the neighborhood cats. (It's easy to wash the blanket. Eventually I'll replace it with something just as cheap.)
Finally, the footstool was another $5 garage sale purchase. It, too, can be pressed to serve as an extra seat.
This corner of the back porch is a relaxing haven. When we host dinner parties, it is the favorite retreat for the men, who crowd together to share their various vices and to engage in fine conversation. I furnished the spot for only $53.
(Let it not be assumed that I am always able to exercise such frugality — the book that I am reading in the photo cost $39.95! We each have blind spots.)