Personal Finance – The Modern Piggy Bank

How To Use Your Cash Back Credit Card To Build A Rainy Day Fund

Cashback credit cards? Awesome. I’m personally so thankful that cash back cards are a thing because I utilize them to the full advantage. Or so I thought. Personally I have a Chase Freedom Unlimited card which gives me 1.5% back on everything I buy. Considering the fact that I graduated college recently and moved to a new city for my post grad life I got a lot of cash back during this move.

I try to use my credit card for every single purchase that I make because of the cash back feature. I know a lot of you will say this is irresponsible so let me quickly say I only expense things I can afford and will pay off every month. I don’t carry a balance and therefore I pay no interest on my card. So really, this cash back is just found money for me. When I was moving it was great because as I bought things that I would need in my new apartment my card gave me cash back to buy even more things I wanted but I didn’t consider essential to the apartment such as art or little knickknacks to make the apartment feel more like a home. Sadly, the plant I bought died but that’s neither here nor there. (I was devastated).

So getting back to cash back. If you are a responsible spender with your credit cards and not a frequent traveler I highly suggest going with the cashback option, but again you need to find a credit card that fits your lifestyle and personal spending habits. I know a lot of people around my age in cities like NYC or Boston that if they had excellent credit opted to go for the Uber credit card because of how it directly caters to those people who are very active in their social life. I also suggest checking out the Capital One Savor Card because of it’s great cash back on dining and entertainment.

I’ve talked to a lot of people about what credit card they use and why they chose that particular one. Most people take cash back and apply it to their statement balance so they owe less on their credit cards each month and I highly recommend doing this if you are carrying a balance from month to month. It will allow you to pay down your debt faster and get out of interest payments, if you have those.

Now that I carry a zero balance from month to month I don’t feel the need to apply my points right back into my credit card. Sure, I could go online and get some gift cards or apply them to travel but let’s be honest, I’m 22 and I don’t have time to go on crazy vacations and I try to curb my spending habits so that I can save more.

So I thought about this a lot. I wondered how I can best use my cashback. 1.5% sounds like nothing but it definitely adds up over the course of a year. As I was going through my options for my last point redemption it had an option if I would like to deposit the cash back into my checking account. Now I don’t keep my savings account with chase as you all know if you read my article on savings account, I use Marcus by Goldman. Some more digging allowed me to find that I can link any bank account up to my card and deposit the money there. Aha! A rainy day fund was created.

Sure I have my savings that I deposit a fixed amount in every month because I worked it into my budget, but I’ve never even thought about putting my cash back into a savings account. Even better, it’s an interest bearing savings account so basically I’m being handed money, putting it into an interest bearing account, and earning even more money on top of that. Think of it as a monthly allowance almost.

This is how I personally use my cash back but the more I thought about it the more I saw the wide range of possibilities this really has. Savings accounts offer low interest rates right now with the highest you’ll find hovering around 1.8% while the average market return year over year is 7%. So if you already have a rainy day fund and don’t feel the need to contribute more consider taking this cash back and putting it into an investment account, retirement or otherwise and letting it grow even more than a rainy day account ever would.

Make sure to subscribe to The Modern Piggy Bank using your email address and follow us on twitter @themodernpiggy2. As always you can email us directly at founders@themodernpiggybank.com with any comments or concerns you guys have. Have a topic you want to learn about? Shoot us an email and we’ll do the research.

How To Decide Between A Bank Or A Credit Union

If you are looking to open a new checking or savings account or maybe even secure a small loan you are probably shopping around at all of the banks in your area. You may not have ever heard of Credit Union’s before or have even give it much thought. Well today I am going to walk you through the key differences between the two and why I ended up choosing a credit union for my daily banking.

On a very basic level banks and credit unions essentially offer the same services. You can deposit money into a savings or checking account, open a business account, secure loans, and use ATM’s. The difference lies in how they operate and how they are run.

Banks Explained

As you probably know banks are for profit institutions. They exist to make money not for their clients but for their themselves and their shareholders. As a result you may experience things such as higher fees and lower interest rates on savings accounts. Most commonly people say that going with a larger bank can feel like a very impersonal and sometimes robotic experience.

On the flip side, it’s really nice to have access to ATMs across the country and more branches in more places. And very important to most millennials, most banks are investing heavily in technology to make their online banking and other services more convenient.

Credit Unions Explained

A Credit Union is actually a non-profit institution. It is technically member owned although there usually are some executives to run the day to day operation. As a result, lower fees and higher interest rates on savings accounts are used to get customers in the door. Credit unions usually cater to a smaller more exclusive customer base but there are quite a few that have massive membership numbers. For example, lots of large corporations have credit unions for their employees and the credit union I use requires your address to be within a certain distance of the nearest branch. Although, I am sure you will find a credit union to fit your needs.

Aside from the lower fees and higher interest rates on savings accounts credit unions are known for the high quality customer service they provide. Most people who use them say the bankers they interact with really go out of their way to understand your financial needs and help you plan to achieve your goals. This all ties back to the customer owned non-profit status that they hold.

The big downside is the lack of branches and ATMs. Since most Credit Unions serve specific areas or companies they are regionally located and don’t have a national network of branches. However, even though your individual ATM network is usually limited, your credit union may give you access to the CO-OP network which boasts over 30,000 ATMs.

Summary

It really comes down to what you are looking for in a financial institution. If you are looking for a convenient place to deposit and withdraw money I would say the bank is the superior option, as they are more nationally present and have quick automated processes in place. If you want to save a little more and the customer service experience is important to you go with the credit union. These institutions come in all shapes in sizes so my best advice is to shop around. You might be surprised with what you find. For example, a small bank might be personable like a credit union with a larger presence and a large credit union might be able to give you lower fees and high interest savings with many of the benefits of banks.

My Experience

I ended up going with my local credit union and here’s why. Their checking account yields 2% interest on balances up to $10,000 and all I have to do is have at least 1 direct deposit a month and swipe my debit card 12 times a month. I get direct deposit through work and the 2% interest will pay for my months worth of coffee and then some. Additionally, they offered me a credit card specifically for those who are new to credit and looking to build up their credit score. Additionally, my credit union does participate in a CO-OP network and will even give me a refund of up to $20 worth of out of network ATM fees. It was a perfect setup for my specific situation.

The bottom line is keep an open mind, shop around, and ask questions. Everyone’s situation is different and could be better suited to a variety of different options. If you need help deciding feel free to reach out to us and we can walk you. Through more detailed differences.

As always you can reach us at founders@themodernpiggybank.com for questions comments and concerns. Follow us on twitter @modernpiggy2 and please subscribe!

Would You Rather Have Starbucks Or $700?

Choose right now… Starbucks or $700? Not Coffee or $700. Just Starbucks. Choose. Now.

Starbucks is in the news a lot. They are either opening their first store in Milan (highly suggest clicking on that link, the pictures are crazy), having trouble in Philadelphia, or boosting their stock price due to another great quarter. At one point there weren’t enough Starbucks stores in the United States to serve the demand for their coffee, and that was only last summer!

You’re probably saying that’s crazy because if you live in a major city it seems like there are multiple Starbucks on every block. You’d be right.

Now, we’ve seen a lot of the articles about how millennials could have so much more money or even be a millionaire if they cut out all their “trendy” food items such as avocado toast. A certain Australian millionaire even said the reason millennial aren’t millionaires is because of their avocado toast addiction. We saw some articles where the math was done and we even did it ourselves and found the idea a little far fetched. But it did get us thinking. Is there anything about our consumption habits that really do mess with our personal finances?

Absolutely. Besides the fact we rely so heavily on credit cards and think when something is on sale we “saved” money when in reality we really just spent less but our caffeine habits really do damage our personal finances. I’ll be the first one to admit I got Starbucks and Dunkin or whatever coffee was available to me in college almost every day. That was on top of my Keurig or Mr. Coffee (depending on what year I was in college) that I would make most days. Looking back, I wasted so much money on coffee.

I read recently that the average Starbucks order is $2.75 in the US and in NYC it’s $3.75. Most people I know stop for coffee at least once a day, usually on their way to work, every weekday. So 52 weeks in a year means 260 work days, we’ll be liberal here and say you get 15 vacation days you take full advantage of so 245 working days a year. We’ll go even further beyond that and say at least another 15 of those you’re running late and don’t get to stop to get your caffeine fix, now we’re at 230 days a year. Sounds like a lot but it’s pretty common for coffee drinkers to have at least a cup every day, specifically every morning, if not more than that. So some quick math of 230 days x $2.75 for an average order and you get $632.50 a year that you’re wasting on over priced, over roasted coffee.

Now I get it, if you’re addicted to caffeine like I am when you need coffee, you need coffee. Most likely your work has a coffee machine somewhere that you can get for free so let’s discount the entire working day and only focus on your mornings.

I personally bought a Mr. Coffee very similar to this one and use it every single day. The Mr. Coffee shown above costs $35.96 or just around 13 cups of coffee at Starbucks. Now for anyone who is going to say that they don’t have time to wake up and make coffee, I wake up at 4:50am and program this wonderful machine the night before to start making coffee at 4:45am, so not only do I have a fresh cup of coffee right when I wake up, I also get to wake up to the smell of freshly brewed coffee and honestly there’s nothing better than that.

I don’t even buy filters, my Mr. Coffee like the one I referenced above comes with permanent reusable filter that I just rinse out every night and put right back in. And you can pick something up like this Byron Stainless Steel Travel Mug for less than $10 and now you’re in business. Total outlay so far: $45.96 or less than 17 cups of coffee at Starbucks.

The last thing you’re going to need is coffee and this is where the real savings kicks in. You can do what I do and drink Maxwell House Original Blend Ground Coffee which sells on Amazon for $6.93. There is 240 6 fluid ounce cups in this thing! Conveniently happens to be just around the amount of cups we estimated the average person to need to go to work. That’s so much coffee. That’s less than 3 cents per cup of coffee! If you want to follow the famous Shark Tank Invest Kevin O’Leary you can take your $2.72 in savings and invest them.

Adding all this up that’s around $53 a year for your coffee addiction in the first year and it only goes down from there. Drink more than one cup a day at home? Raise your cost by $10 to $20 depending on what type of coffee you choose to order.

Some of you are going to say that all of this isn’t worth it. The daily expense is minimal on a daily basis and you don’t notice the overall sum you spend. I get it. Like I said before I have been there. But once I realized what was happening and how much I was spending my habits completely changed. The small daily expenses truly add up and turn into major expenditures. Don’t let this happen.

Take that extra $700 or more every year and invest that money or put it into your savings account and let that money grow. You’ll still be having your coffee fix every day, but you’ll be getting it in a way that allows you to minimize your expenses and optimizes your savings.

Make sure to subscribe on our website for all the latest personal finance and investing news and advice and follow us on twitter @themodernpiggy2. Have a question about personal finance you’d like answered or have comments or concerns or just want to chat? Email us at founders@themodernpiggybank.com

What 3.9% Unemployment Really Means

I feel like every day I read about how the economy is teetering on the edge due to trade wars, tariffs, and soaring equity prices. While it is true these things have the potential to threaten the economy that doesn’t mean you can’t enjoy the good times while they last. I guess that kind of news just doesn’t sell well.

Now, I am not saying to spend your raise or bonus lavishly. I am not telling you to go all in on stocks, in fact I would advise against that. I am simply talking about how now is the time opportunity knocks. The labor market is stretched really thin right now while people are lining their pockets with cash. Don’t have a job? Apply. Want to change industries? Do it. Want to launch that business or super successful personal finance and investing blog? There is no better time to do it than right now. (oh wait thats us)

From my personal experience, during my job search a lot of opportunities were presented to me that probably would not have if firms were not scrambling for talent. Additionally, during the interview process multiple hiring managers from some of America’s most competitive firms told me its a job seekers market, meaning the supply of jobs is outpacing demand, and to be aggressive when negotiating an offer. Seniors in college especially apply for that job you don’t think you’re qualified for!

Further evidencing this claim is the Bureau of Labor Statistics Employment Situation report published each month. You’ll notice over the past year unemployment has steadily declined and seems to have leveled off around 3.9-4.1% range. Firms are simply running out of talent to recruit.

source: tradingeconomics.com

If you want to learn more about what sectors are benefiting the most and the BLS outlook for unemployment you can access them at BLS.gov in the news release section. You can find last months (August 2018) here.

I urge you to take the leap now that times are good instead of waiting and regretting what could have been.