Its your money

Thursday, July 06, 2006

Make your money work for you

What is the interest rate you are getting for your money? Check out the website of Emigrant Direct(http://emigrantdirect.com) and if you are getting less interest rate than what emigrant direct is providing, you might consider moving your money to that bank. IngDirect(www.ingdirect.com) was one of the earliest online saving bank and since other players entered the market, it has trailed in interest rate but it still continues to be one of the most popular online saving account due to ease of money transfer and brand names. I have had an account with them for past 5 years and only now when other banks are giving atleast .75% higher interest rate I am moving my money to emigrant direct.
Here is the list of some of the most popular online saving banks in order of popularity.

Ing(www.ingdirect.com)
Emigrant Direct(http://emigrantdirect.com)
HSBC(http://www.hsbcdirect.com)
GMAC(http://www.gmacbank.com/)

How to maximize your credit card rewards

Although I got my first credit card 6 years ago, it was only 2 years ago that I started exploring the credit cards with rewards. Once I started accumulating the credit card reward points I realized that I have missed out on a decent amount of money by not getting the reward cards before.
I have had several credit cards with rewards so far but it is only now that I have found a way to maximize my reward points. In this post I will discuss some strategies to maximize your reward points. I have following reward credit cards.

1. Citi® Dividend Platinum Select® Card
This credit card gives you 5% cashback on all grocery, gas and drugstore purchase and 1% cashback on all other purchases. I use this credit card only at those stores which give 5% cashback because 1% is just not good enough cashback.

2. Citi PremierPass® Card
Although this credit card gives you 1% cashback on all purchases but if you travel as much as an average american and spend as much as an average american then your net cashback could be as high as 2%. Here is how this works.
If you purchase airlines ticket using this card then for every 3 miles that you fly you get one flight point. For every dollar you spend you receive a purchase point. You can redeem a flight point only if you have a matching purchase point. So if you have enough flight point then for every purchase point you should have a corresponding flight point resulting in 2% cashback.

3. GAP card
I have a gap card which I can use for GAP, Banana Republic and Old Navy. This card gives me 5% cash back. I purchase most of my clothes from GAP or BR so it makes sense for me to get 5% cashback on that purchase.

So I use 1) for all my grocery, gas and drugstore purchase 3) for my purchase at GAP and BR and 2) for all other purchases.

There is another trick you can use to increase your cashback returns. Several grocery stores sell gift cards for various stores, If you need to buy something from a store and your grocery store carries gift card for that store then purchase the gift card from the grocery store and then use this gift card to make your purchase. The reason for doing this is that you will get 5% cash back for purchasing the gift card from the grocery store.

Monday, June 26, 2006

Save money on Bath products

I never buy bath products at retail price from local grocery stores. If you have costco membership or have a walmart nearby then you would already know that you can save atleast 25-50% on bath products by purchasing from these stores.

I neither have have a walmart near my home, nor a costco membership so I save 100% on most of the bath products. At many drug stores like rite aid and wallgreens a lot of bath products can be found for free after rebate. My favorite is Rite aid because filling out rebate is very easy unlike wallgreens where you have to mail in the rebate. Can you believe that I have enough supply of bath soaps, tooth brushes and tooth pastes for more than two years, most of which is free! Similarly you can always find great deals on cosmetics, which I dont use, at RiteAid. Their new deals come out every sunday so sunday morning you can check out their weekly ad on their website and if there is something you are interested in, go get it. For me Rite Aid is on my way to the gym so I pick up my stuff while comming back from the gym.

There are several other places where you can save money on bath products. My another favorite store is Bath and Body works. The have this semi annual sale, twice a year when most of the stuff is 50-75% off. I buy their glycerin soaps for 1$(retail 3.50$) , their botanic shampoo for 1.87$(retail price 7.5$) and deodorants and perfumes for ridiculously low prices.

I didn't used to pay attention to saving money on these things but once you start paying attention it is like an addiction. One must however strike a balance between getting a good deal and amount of time spent on finding that deal. If an hour is spent on finding ways to save 5$ then its not worth it, atleast for me. Remember time is money and with money you can buy time so in a way they are interchangeable hence you should decide what is the value of your time and spend time accordingly on finding deals. You can ofcourse save time by reading my blog :)

Friday, June 23, 2006

How much do you need to retire

The good thing about having lot of money is that your money can work for you. I am a big fan of my money working for me so that I dont have to if I dont want to.

Just for theoretical purpose I have thought about how much I need to retire several times. The sum that I came up with was 3 million $ which was about 3 years ago when I was getting 3% interest rate. This is how I came up with this number.

I need 60K per year to live a decent life so I want my money to earn me 90K per year which is 150% of what I need. In this case I can save 30K-income tax and this way I not only get money to live but my savings also keep increasing. Increased savings will bring increased interest income to counter inflation.

From socialist to capitalist

I was raised in a socialist country where money was associated with dishonesty and exploitation. Ofcourse during that time in my country the only way you could make money was dishonest way. Things changed when my country was exposed to capitalism and free market. I feel myself fortunate compared to my parents who did not have the advantage of free market. Although they wanted to make money for the better future of their kids but they were not ready to adopt the means required for that. So they chose the saving money route to make money. They taught me that saving one dollar is not making one dollar as the saying goes but saving one dollar is equal to making 1.25 dollar, assuming 17% income tax and 8% sales tax.

After taking a degree in computer science I came to USA. I was making a decent amount of money working for a big software company. So far I was not very money conscious, reason being I had none. As I started getting money I had to do some thinking on what to do with it. Although my mind worked for a software company, my heart was in films. I used to think that making movies takes money so I had to save money for making movies. I wanted to earn a lot of money as soon as possible so that I could retire early and then could start making movies. It was naive on my part to think that for making good movies I needed money. It turns out that talent is a more important pre-requisite for making good movies and I just wasn't talented enough.

I learnt many lessons with this episode. Firstly that we all have some quixotic dreams and most of us over estimate our capabilities to achieve them but in the end we have to come home to harsh reality. Secondly I realized the importance of money and I increased my MQ, the money quotient.

This blog is an attempt to document my journey to become a millionaire. I will share my strategies and methods with all my readers so that they can also take advantage of them and share their experiences, strategies and methods with me.