191st Carnival of Personal Finance

I participated in the 191st Carnival of Personal Finance today, check it out at Dollar Frugal!

Fair Isaac is Changing the Rules, AGAIN!

Just as soon as I understood how the magical elves calculate credit scores, they had to go change it up on me!

There's some good news and some bad news. No more adding a name to a credit card to boost the score of the person with crappier credit is the bad news. (Yes, this can be a good thing when done properly.) The good news is that one BIG BAD item, such as a repo or a default won't hurt you as much as long as everything else is in order.

Seriously, read more at Consumerism Commentary.

Why You Should at Least Learn to Bake:

My quest for an amazing blueberry muffin recipe has been a thorn in my side for a year or two now. I try (emphasis on try) to bake something for my breakfasts every week. I don't really like cereal in the morning. I do like oatmeal and other hot cereals, but I prefer for my breakfast to be a grab and go affair.  Buying pre-made breakfasts (bagels and the like) is a good plan, and when the price is right, totally affordable. But every time I buy bagels or muffins or another pre made breakfast food, I stare at the big jars of flour and sugar on my counter and sigh.

This week, I finally found an amazing blueberry muffin recipe. These are coffee shop caliber muffins. The only changes I made were to reduce the amount of sugar and flour in the topping (to 1/4 cup sugar and 1/3 cup flour) and to make 12 muffins instead of 8. If you follow this recipe, be sure to cube up the butter for the topping fairly small.

If you live in California and you step into your local Albertson's this week to purchase ingredients for blueberry muffins, here's how much this recipe would run you, per muffin. Except for the Barbie muffin wrappers part. I found those on manager's special at Food 4 Less. You could also jam aluminium foil or wax paper into the muffin pan cups. Or just forgo the wrappers completely.

40 cents a muffin! And that's assuming you haven't shopped around a little for the best ingredient prices. I did, and the batch I made last night probably came in at closer to 25 cents per muffin, meaning that a muffin and a cup of Starbucks coffee made at home runs me about 28 cents total. (We've got a friend who works at Starbucks, he sells/gives us his weekly pound of coffee.)

If I had homemade coffee and a muffin everyday for a year, I'd be paying $102.20 a year to do so. By contrast, spending $3.25 on drip coffee and a muffin at a coffee shop once a week would cost about $169 a year. Homemade coffee and muffin just once a week for a year? $14.56, for me.  Which, if you're still with me, saves $154.44 a year on muffins and coffee.

And the kicker? Once again: homemade coffee and a muffin, every day, for one year, would cost me $102.20. Buying it at a shop, everyday, for a year? $1186.25. That's assuming you're buying a cup of brewed coffee, as opposed to a latte which would bring your yearly coffee and muffins total to about $1825.

And no, I didn't forget a decimal point.

I'm All for Stimulating Our Economy...

But I'm a little tired of hearing about it. I realize there are people losing their homes in foreclosure. I realize there are people whose retirement accounts are now undervalued. I realize that millions are out of a job right now.

I ALSO know that in America, when you're unemployed - the government gives you a hand. I think that rocks. I'm willing and proud to help pay for unemployment. We live in a country where - when the markets tank and people are losing money and businesses are hurting - the government tries to find a trillion dollars to fix the leak. Everywhere I go I hear about the economy. I even hear about about the economy from people who don't have a savings account, much less a retirement account or a mortgage.

There are a couple million people living in poverty in this country who probably don't feel the pinch at all. They were already pinched.

What in the hell is wrong with us? Why are we still whining? Why are we so worried about whether we can gas up our cars, and why on EARTH do people think not having cable TV is a sacrifice?

My husband and I are well off.  Extremely well off, actually. Insanely, insanely well off. We've got multiple computers in the house (well, duplex), two cars, multiple televisions (we need to dump one, incidentally), annual passes to Disneyland, cell phones, an iPod each, and secondary educations - albeit incomplete ones.

We eat dinner every single night, we have lunch every day, and breakfast when we wake up on time. Our cat eats twice a day. We have running water, electricity, gas, and high speed internet. (No cable TV though, that's why we have the high speed internet - oh the sacrifices we've made.)

I have 30+ pairs of shoes, and that's after selling off nearly all of my designer shoes a couple years back, so I could pay rent. See, I thought I was making a huge sacrifice, selling my way, way overpriced shoes to make rent.

My overpriced shoes could have fed a family for a year in Sierra Leone. I don't have numbers on that, but I'm not a bloody statistician. Google it, I'm sure you'll find that half a pair of my designer shoes could have fed somebody, somewhere.

Back when I had cable, sometimes I watched 'My Super Sweet 16.' For those of you who don't know - ugh. Just click the link. It's a train wreck. These girls scream about not getting a $500,000 car. I couldn't look away. I got the hugest kick out of swigging by beer, confident, nay smug, in my superiority to a bratty little child whining about her multi million dollar birthday party.

Here's the thing about that; I'm not much better than those petulant brats when you put it in a global perspective. I don't need to quote statistics. Almost anyone who's lived in the world for four or more years knows darn well that that are people in this world who live for a month on what we spend on a latte and a bagel in the morning. My household pulls in more than 50K a year before taxes and by God, we are filthy rich. Not only are we filthy rich compared to most of the world, we're filthy rich compared to millions here in the U.S.

I'm not saying that those of us who are lucky to live in the ultimate First World nation should scrap our big screens or our cars our even our luxury goods. 

I'm just saying we should quit whining.

http://www.worldvision.org

Oh No, They Be Holdin' My Refund Hostage

You've probably already heard the fuss about getting IOUs instead of refund checks here in California. That said, according to this, if you file early enough, you should get your refund as usual. Last year the FTB (Franchise Tax Board) processed my refund in a matter of days. As usual, I'm neither expert nor professional, but this is probably the last day to file with even a slight hope of getting your return processed before the February 1st deadline and the 30 day hold.

As I've emphasized before, most of my readers will qualify for free file - for your federal taxes as well as your state taxes. If you're in California, I suggest you grab your W-2 and try to make the deadline.

Economic Stimulus Now, Redux

A fact you may not be aware of is that if you get legally married late in the year...say, the day after Christmas - you're required to file your taxes as though you were married for the entire year. Even if you get married at 11:59 pm on Dec 31st, the IRS considers you to have been married for the entire year.

2008 is a particularly useful year for this. Remember the Economic Stimulus rebate? Single folks got somewhere between $300-600? Married folks got $1200? The amount of your economic stimulus rebate was based on your 2007 taxes, because you hadn't filed your 2008 taxes yet because the year wasn't over. You 2008 self was getting money based on what your 2007 tax return indicated about your 2008 return which would be filed by your 2009 self. Sort of. Anyway, that's part's boring. (Though there may be DeLorean joke in there somewhere.)

Point is, if you received a $373 rebate check as a single person in 2008, and then got married later in the year to a spouse who got a $600 check, the government owes you $227 - because the IRS considers you to have been married during the handout. $1200-($373+$600) = $227, for those of you who hate 'rithmetic.

If someone claimed you as a dependent on their 2007 taxes, exempting you from the rebates at the time, but no one can claim you in 2008 - the government owes you a stimulus check.

If you had a baby in 2008, you also qualify for more money.

Basically if your life changed at all in 2008, you might qualify for more money.

Where do you claim the credit, you may ask? Good thing I read the IRS website, so you don't have to:

Form 1040 - Line 70
Form 1040A - Line 42
Form 1040EZ (the one most of you will likely use) - Line 9

All of the tax forms will come with an instruction worksheet on how to calculate your stimulus credit. So if you're doing your taxes on paper using pen and ink by the light of a gas lamp, knock yourself out calculating that. Or enter "RRC" on the appropriate line and the IRS will calculate the stimulus credit for you.

If you're filing online, most online tax preparation programs will calculate this for you.

Most folks reading this blog, except maybe my mom (hi mom), qualify to free file. So please, PLEASE, don't hand a tax prep firm your hard earned money to file your probably very uncomplicated taxes for you. Don't give them money to give you a refund anticipation loan at a ridiculously high interest rate when the government will direct deposit your refund in a week or two if you file early. Seriously, you may as well - well, you know.

Everything I Can Spout About Credit Scores

Ever since I started writing this blog and generally pulling ahead financially, my friends have been asking me about finances, especially credit.  Specifically they want to know how on earth a credit score is calculated. I found the answer about 2 years ago in a book somewhere, and I've been spouting a vague recollection of it ever since (luckily, it turns out my vague recollection was closer to "spot-on" than "oh crap, I totally remembered that wrong.")

After a quick Google to double check my memory, I present to you the basic components of a credit score, and my completely unprofessional (meaning: don't sue me if you try this and it fails) advice for beefing up the magic number.

• 35 percent - PAYMENT HISTORY. Obviously any lender is going to want to know how reliably you pay your debts. Some of us got shady car loans at 18 and never did reign ourselves in so that we could pay them on time and now we have an ugly, ugly blemish on our credit reports because we were really, really dumb back then. You know,  just some of us. THE FIX:  For goodness' sake PAY YOUR FRAKKING BILLS ON TIME. Your payment history is the single largest piece of your credit score. Call your bill collectors (your cell phone company might be a place to start) and ask them to start reporting your payments to the credit bureaus.  If you have no revolving credit accounts to pay off on time, get a tiny secured credit card (Many secured cards are total scams, so do some research. I recommend the Bank of America Platinum Visa. $29 a year, and you can secure it with as little as $300. I paid it off every month and received my security deposit back after 9 months. I now have an unsecured card that's been paid in full, on time for nearly a year. ) Credit card debt is something I've somehow (magically?) never racked up.  But if you have credit card debt, start making bigger, on time payments. For advice on finding the money to do that see: the rest of this blog.
  
  
• 30 percent - OUTSTANDING DEBT. Some of us are a little screwed in this department - we had crappy car loans or we bounced a teeny tiny check when we were 18 and it's gone to collections and it's grown so big that we are NOT ponying up $120 for a freaking Vanessa Carlton CD. (Shut up.) Some of us fell flat on our backs in bars when we were 21 and sprained our necks - an injury we didn't even know was possible until we did it - prompting a hospital visit we still haven't paid for (though we were theoretically insured at the time, it would be awfully difficult to prove now.) Not that I did any of those things, but - you know, maybe some of you guys did. This outstanding non-interest earning debt obviously affects your overall score. More important than that old debt that is your DEBT to CREDIT RATIO - if you've got revolving accounts (credit and charge cards) just how much of that available credit are you using? THE FIXX (two Xs, like the band - hee!): First, for some freakish reason that I still don't quite understand - paying off all of your aging non-interest earning (ie, not credit card) accounts might actually dock your score in the short term. If those random debts are old enough, they'll drop off after seven years. If you're not looking to finance anything anytime soon - letting them disappear is better. As far as your debt to credit ratio, it looks good to only use a small portion of the credit available to you. If you've got a $10,000 credit limit, try to use just $2500 or less at a time.  Using only 25% or less of your available credit looks good to lenders - and then they'll want to give you money if you ever want a house or something. A good way to keep your credit usage low is to use your card ONLY for paying a few bills - then pay the credit card bill every month.
  
  
• 15 percent - LENGTH of CREDIT HISTORY. This one is particularly unfair to younger people. If you're a totally responsible 20 year old (and they do exist), your relatively short credit history is going to hurt you - past behavior being indicative of future behavior, they don't think your two years of paying off the credit card your mom co-signed for you counts (though it should). THE FIXX (dun nuh nuh nuh saved by zero...I'm so sorry) If you have no credit history at all, get a really, really low limit card. Use it very little, pay it off every month. It takes about 3 years for your good credit behavior to "count" - that is, 3 years before the credit bureaus see your timely payments as a habit rather than a fluke and raise your score significantly.
  
  
• 10 percent -  NEW CREDIT (INQUIRIES).   Getting a new credit card, loan or other credit account will negatively affect your score for a short time.  But not for very long.  Even letting a lender LOOK at your credit score docks you points, the theory being that too many inquiries means you're desperate and broke and looking for a handout you'll never pay back. If you've given someone permission to look at your credit report, it's considered a hard inquiry, and it docks your score by 5-10 points. A bunch of hard inquiries within a short period of time are counted as one (to account for consumers shopping around for the best rate.) If you pull your credit yourself, it is considered a soft inquiry and does not dock your score. THE FIX: The good news is that hard inquiries drop off your report after two years, so if you've got a bunch of inquiries dragging your score down, they'll be gone fairly soon. Beyond that, just be selective about who pulls your credit and pull it rarely. 
  
  
• 10 percent VARIETY OF ACCOUNTS. This is the mixture of credit accounts you have. Installment loans (cars, student loans) and revolving accounts (credit & charge cards). THE FIX: Lenders like to see a healthy variety of accounts, but not TOO many accounts.  Generally you want 2-5 revolving accounts and 1-3 installment accounts. ( But don't quote me on that, I just remember reading it somewhere, no lawsuits if I remembered incorrectly!)

And there you have it - prety much everything I know about credit scores as it applies to younger folk. 

Oh!

Catchy commercials notwithstanding, don't use freecreditreport.com unless you will definitely remember to cancel your "membership" after the trial period. You are entitled to one free report per year from each of the three major credit bureaus. Get it at annualcreditreport.com.

No Carpet Jokes, Please

Why anyone buys anything new is beyond me. We got our Kenmore microwave for $7.50. We got a wicked sweet coffee table for $15.  There are folks who might spend upwards of $500 or more on just those two items alone.

But we also bought a rug at a fancy furniture place for $80. It was the display model, so we had it cleaned for $49. We've got hardwood floors, so a rug was necessary. We nabbed ourselves a $400 rug for a total of $129. Which is a hell of a lot for a rug, but not a whole hell of a lot for a rug that makes your feet feel oh, so happy. 

Here's the thing, I can see laying out $129 for a really nice rug, maybe even $150.  A good 5x8 rug. But who on EARTH would throw down $400 for the same thing I got for $129? I "saved" $271 on our rug. I use quotation marks because I didn't save it. I don't have $271 in savings.

But we do have a rug that makes our toes happy.

Another way we might have gotten a super nice rug - and I should have thought of this, but the rug matched the micro-suede couches my now in-laws bought us for Christmas and I couldn't resist - another way we could have nabbed a nice rug would have been to call up a few dry cleaners and ask them if they had any abandoned rugs lying around. Sometimes people drop them off for cleaning and never pick them up, or they can't pay for them, hence, abandoned rugs. Most dry cleaners will donate abandoned items to Goodwill or to other charities - but if you call and ask you could score a sweet rug for free.

Or for the cost of the original owners' dry cleaning, anyway.

I Have Time for this Now, Right?

Since my last post, I took 19 units worth of classes, nabbed a job as an accounting assistant, and I got legally married. And I moved.

Observations on Each:

(1) 19 units. Do NOT try this while holding down a job of any kind. Well, maybe a 4 hours a week at Starbucks type job - but certainly not a job that requires 35+ hours that you need to make rent. Also don't try to take 19 units and work while attempting to have any sort of meaningful relationship with anyone ever.

(2) New Job! I'm the right arm of the CFO at my company. I work during the day. I have weekends off. I miss the casual atmosphere at In N Out Burger, but I don't miss the cheese burns or the closing shifts.  

(3) Legally married. Between my new job and the fact that Fiance -  I mean, Husband - is on salary now, we feel rich. Of course, we got legally married so that we could live together in order to save money to fund the big wedding in June. (We are both just old fashioned enough that the idea of shacking up landed pretty firmly on that side of Not Cool.) So we're legally married, and saving for our wedding.  Maybe not at all romantic, but completely practical as far as we're concerned.

They say that it's not what you make, it's what you spend. With our combined income and somewhat lowered expenses we are coming out far, far ahead of what I'm used to - which, if you'll recall is paycheck-to-paycheck at a burger joint. We're by no means rich, but we make just enough to feel like we can blow our cash. We try not to, and we're pretty good about not blowing huge wads of money on useless crap...except when it comes to comic books - which I have taken to rationalizing as a quality of life expense. Being frugal enough in other areas (ie, not having cable TV) to be able to afford a comic book or two every paycheck with our allowance? WORTH IT. We're 24 and 26 years old, if anyone's wondering.

I've also always theorized that this frugality stuff works much better with two people - I'm quickly learning that it does. More on that as the weeks go by, but for now thanks for reading this after such a long silence!

Hiatus for School

Hello everyone!

BurnFive will be on hiatus until December so that I can take a 19 unit courseload, work nearly full time, and plan my wedding without losing my mind.

Thank you for reading and for all of your support.

I'll be back in December with all sort of tips and articles on how to have a lovely holiday season without burning through your cash. See you then!