About My Credit Card Debt
Newer readers may be alarmed by my high levels of credit card debt. In short, I’m borrowing money for free and keeping it in safe investments while earning me interest. This help me earn some extra income of over $1,000 a year. Recently I put up a detailed series of posts on this 0% game. I don’t pay any credit card interest.
More Thoughts
Although this was another good month overall, I am no longer working full-time and am back at school, so I won’t expect things to be quite as nice the next few months. I will continue to do extra freelance work on the side. Spending was high this month due to my trip to Europe, where I tried to do things frugally while still splurging a bit.
I sold all my stock picks this month, and have started my goal of reading some active-investment books. They have not been very enlightening. My passive investment portfolio did well this month. I transferred $10,000 to my Self-Employed 401(k), the only deposit I plan to make for the year.
Looking forward, our financial focus remains to keep building cash for a house downpayment in approximately one year. We are also going to start to look for new jobs in a few months time, where we hope to both increase our salaries.
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I would be cautious on the number of credit applications you put out there for that free credit. Each inquiry counts against your fico score and furthermore, the more accounts you have open the worst it looks to lenders. Be careful.
Just want to say great blog. I read it everyday!
Good work on increasing your networth. What active investing books are you reading?
Teddy – Don’t worry, I’m very aware of my credit score. The effect of inquiries fade away after 6 months, and are not perman The ‘more accounts = worse score’ statement is not accurate. You could have 1,000 accounts and have a great credit score.
Jason – Thanks!
Loi – For now, mainly lesser-known books given to me free by publishers. Going forward, I want to read Phil Town #1, Reminisences(sp?) of a Stock Operator, Little Book whatever by Greenblatt – whatever comes in first from the library 🙂
I see you don’t have any taxable account except the brokerage account with a small amount. Does it mean that you don’t invest outside your retirement account? I remember read somewhere that your cash savings are for down payment (right?), but I think it still makes good sense to have some taxable investment so later on you can start to withdraw from the taxable account first and let money in IRA/401(k) grow tax free as long as possible.
Also, all of your investments are in index-funds. There are some good actively managed funds with low cost and these funds may not be available for new investors for too long as they tend to shut the door when the asset reaches certain level.
My overall thinking is that right now, we should max out any type of tax-deferred vehicle available because later on in life we will have plenty of time to put money into taxable accounts.
Right now, we qualify for the Roth IRA. In a few years, we most likely won’t due to income limits. Also, the max for a 401k is only about $15,000 a year per person. I hope to max that out as well later on. The Solo 401k should help us out, but that’s only if I still earn self-employed income.
All this is due to our unique situation, I do agree that if you’re going to retire early you should have some funds in non-IRA/401k accounts.
As for actively managed funds, I think there will always be some ‘good’ funds that are in danger of closing due to asset size. But if you’d like to throw out some examples, I’ll check them out 🙂
Jon,
When you purchase a home, how are you going to value it on a monthly basis? Zillow? Just curious…
Just took your advice and opened a 15K credit line with BofA. 0% fixed intro 0%APR for purchase and balance transfer for 12 months. I will pay off my 9K Credit Card, bank the rest in a 5.11 Costco/Capitalone MM and earn a little interest until the balance comes due. Thank you for these tid bits of Money Making Strategies. Question…I have a IRA that hasn’t made any money since the “Dot Com” times… and heard rumor that some (regular) people are making 11% – 12% back on their investments is this possible? How?
Hey Jonathan. Totally love the site. I also opened up some credit cards for the money, and my credit score went down quite a bit from 810 to 681.
But I now have 43k working for me from two different cards. One of them was actually a 1.99% rate for life on transfers until I pay it off. That was my Citi diamond preferred card, no fees annually or for the transfer, I think I really lucked out on this one, I just maxed it out and shredded the card so no new charges come through. I actually put this transfer into the stock market since I am pretty confident that over the life of this investment I should be able to do better than 1.99%, so far it is working because I have already made 15% on my money from that, just investing in some large and steady companies with dividends. (Of course I do not expect that sort of performance in the future, the market has just been overly strong lately which sometimes foretells of a downturn, and I know that move is certainly risky but I am a risky investor, anyone thinking of doing that should be willing to take a loss.)
The other one is only 15 months no interest from Chase, so I put that one at http://www.eloan.com for their savings account that gives me 5.5%, (has a 5k minimum to open).
As you can see, this really did take a dent out of my credit score, but it is totally worth it to me, may not be worth it to someone in a different situation, but I thought the readers might like to see an example of what this can do to your score.
You also saved me 15% on my cingular bill. I think all you need is to have access to an e-mail address that ends in .edu, then you should be able to get that discount.
If you want a really good book then you have to read the Intellient Investor, written by Benjamin Graham, and updatd by Jason Zweig. That book is a must read for anyone looking to invest in direct stocks.
Thanks again so much for the site.
love your blog.. and happy for you that you are one more step closer to your goal…
thanks for the reply..
Itzy
“Jon, When you purchase a home, how are you going to value it on a monthly basis? Zillow? Just curious? ”
I don’t know, I expect I’ll try to value it conservatively using whatever tools are available.
“…rumor that some (regular) people are making 11% – 12% back on their investments is this possible? How?”
No free lunch 🙂 Maybe some high-yield bonds, but with significantly added risk.
“If you want a really good book then you have to read the Intellient Investor, written by Benjamin Graham, and updatd by Jason Zweig.”
Yes, that one’s definitely on my list too.
I noticed you sold stock this month and you’re holding it in cash. Interesting, I’ve done the same myself. Personally I’m very very worried about the stock market, it’s looking very toppy to me.
I know the ‘soft landing’ scenario in the housing market is being pushed, and ‘no significant impact to economy’ too, however I don’t believe it, looking at the massive consumer spending that makes up the economy and how much of this is funded recently by taking on debt, MEW etc, I’m sure we’re in for a couple of rough years.
The recent reports showing property prices down by nearly 10%, and a lot of analysts predicting another good 10-20% required, I think we’re headed for a recession, and cash is where I feel safest.
Anyway, thanks for your blog, I really enjoy it.
Gary
Also, another couple of points.
Firstly with regards to holding money in cash, putting into savings account or money market fund. I’m a little concerned about rampant inflation especially as I don’t believe the published CPI figures, they are massaged and manipulated until they no longer resemble reality. The reality of CPI is felt in my pocket every time I go shopping, fill the car with gas or pay my bills. I’m also unhappy they stopped producing M3 money growth numbers (because they were growing too fast!?).
For safety I’m considering putting half my savings in Gold, the ETF (GLD) looks like a good option, its a good inflation hedge, and will be especially important if the China and other foreign sources decide to stop funding the huge American debt (and as a consequence the dollar takes a huge plunge).
An interesting read that you may be interested in… Empire of Debt: The Rise of an Epic Financial Crisis.
link