Wednesday, August 10, 2011

If you can be an adult, charge everything

Surfing the Web I came across some advice from P.J. Harston, at one point the national editor-in-chief of 24 hours and the former Sun Media national business editor. I love how so many financial writers at daily papers have made their careers from bundling widely accepted ideas and presenting them as insights.

When it comes to managing your money, P.J. advises his readers to "get rid of those high-interest department-store credit cards." Use a pay-as-you-go card that you pre-load with cash, he says. For this advise I'm supposed to buy a newspaper? If I followed P.J.'s advice, it would cost me a minimum of a couple of of dollars a year. This is money I cannot afford to remove from my budget.

Flooring: planks and installation on card
You see, I'm retired. I don't have a lot of money. I squeeze every penny. I have discovered that charging almost everything is an easy way to increase the limited buying power of my pension. I charge my telephone bill, my groceries, my car costs. I'm having my roof replaced and I'm charging that. When I had hard wood flooring installed, replacing the worn wall-to-wall carpet, I charged that.

What card do I use? Well, at the moment it is a Canadian Tire Master Card Options Elite. You can't apply for a CTC elite card; you have to be invited. If you charge enough using the CTC card, I think it is about $20,000 annually, CTC contacts you to tell you you've been declared an elite card holder. Your membership is assessed regularly and if your card usage drops, CTC may drop you from the program.

Before this I used a GM Visa card but GM put limits on how much reward cash could be used in the purchase of a small GM car. It was a great piece of plastic when you could save a decent down payment for a GM vehicle. Since this is no longer possible, I have shelved the card.

There are, of course, other cards offering rewards. Look around. You may find one that better answers you specific needs.

Charging everything makes budgeting very easy. One monthly bill details the vast majority of my purchases. My bills peak each December and January with Christmas expenses and there are smaller blips on the months that I must make home and car insurance payments.

I track my expenses using Excel and a spreadsheet downloaded for free from the Web. The sheet is designed specifically for tracking and budgeting income and expenses. I've been using this approach for a few years now. Today there are few surprises. I know where my money goes.

Since you are only charging stuff that you would buy anyway, your costs don't go up but go down thanks to the rewards.

To make this approach work there is only one thing you must do. You must act like an adult. If you can't afford it, you don't buy it. A credit card is not for running up debts. Put big items on the card for a few weeks, when the bill arrives you pay the piper. To pay off a roof or a floor installation you may have to take out  a low interest bank loan but you'll enjoy a few weeks of interest free money and earn some rewards for doing so. Never carry an unpaid balance on a credit card. That is not something that adults do.

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