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.

Buy A House Not A Home

If you are like me, home ownership is probably a long ways away. However, I recently read a white paper called “The Rate of Return on Everything, 1870-2015” published by the Federal Reserve Bank of San Francisco. Theres a lot of good facts and data in there and I strongly encourage you to read it (or skim it like a certain Modern Piggy Bank Founder did… looking at you Will). But if reading 123 pages of economic data and commentary isn’t your cup of tea I’ll spare you the burden and tell you what I found most interesting.

The paper looks at major asset classes over the time period 1870-2015 most notably bills, bonds, equities, and housing and analyzes their return statistics. Believe it or not housing was on par with equities with average return of 7% a year. In the post World War II era, equities have taken a marginal lead, but the investor has also needed to take on more volatility and is subject to the ups and downs of the business cycle. Where as the housing market has been much steadier over time. Additionally, housing does not correlate heavily to the global markets i.e. a bear market is less likely to have a significant adverse affect on housing prices.

Now home ownership has been seen as a rite of passage in America and a sign that someone is financially well off. Unfortunately, situations like the 2008 financial crisis show how a house can sometimes not be a wise investment especially your primary residence. I’m currently looking to apply for my first credit card which I will talk about in a later post, but I find it concerning how the Federal Government insured home loans leading up to 2008 and will loan teenagers with no grasp of the concept of credit hundreds of thousands of dollars to achieve higher education because it’s a “good investment” while private credit institutions want new credit card owners to have $200 spending limits. Anyways, I digress.

Back on track. You will always need a dwelling, it will always be an expense. I will even go on to make a controversial claim that a mortgage on your primary residence is nothing more than an expense. If you weren’t paying it down every month you would be living in an apartment paying rent. When you go to upgrade homes you will now have a higher monthly expense with the total offset by the profits on your past home sale. Furthermore, theres property taxes, utilities, home improvement/maintenance, etc. Your primary residence will probably not produce a dollar of cash flow.

Enter the rental home market. Instead of adding to your expense column you can invest your money into a home for tenants. Sites like airbnb have made this incredibly easy for vacation spots. Some people even rent guest rooms in their own homes to offset their housing costs. For me, it makes sense to invest in an asset that tends to increase in value over time, although this is not always the case, while I can put it to work and pay off its expenses and maybe even a little extra. To take it a step further the white paper previously mentioned suggests that the lower volatility will protect my downside in case things go wrong as opposed to the equity markets which are heavily correlated across the globe.

If you can fit it into your budget and are willing to do the due diligence consider investing in a rental property. I mean not to discourage you from home ownership because it is something incredibly rewarding that I look forward to one day. I mean to challenge your thinking so you can minimize your expenses and optimize your savings.

Whether you like what I said or hated it feel free to reach out at founders@themodernpiggybank.com and follow us on twitter @themodernpiggy2.

Welcome To The Modern Piggy Bank

Welcome to The Modern Piggy Bank. Most likely you stumbled across us on your search to save more or make your money work for you. Either way, we’re happy you’re here.

The Modern Piggy Bank is a brand new website with the goal of cutting through all the nonsense that litters the internet of how to utilize your money to minimize your expenses and optimize your savings. You aren’t going to find where to get the best deals on $10 wine here or how to eat Bougie on a budget, what you’re going to find is solid research, tried and true techniques, and our own personal stories.

Most likely, we are just like you. We’re two really good friends that just graduated from Penn State and secured our full time jobs. Mike works in aerospace while I work at a startup. We live in two separate areas of the country now but during our four years in college we worked hard to put our dreams for a successful business into life.

We tried a lot of different ideas in college, a lot that never panned out but what mattered to us was that we were trying. We tried everything from delivering home cooked meals made by neighborhood “moms” to committing arbitrage on Amazon. What really drew us in was investing and that is where our passion lies. I did my internships at an asset management firm with $1.5 billion under management while Mike spent his time building planes and focusing on engineering. Yet we both knew we wanted to focus on investing. Fast forward a couple of years later and we secured our jobs and starting making real money.

We realized pretty quickly that with real money comes real expenses. And so The Modern Piggy Bank was born. The goal of this website is not to sell you some product that an advertiser wants to push. But to actually inform you of your choices as a retail banking client, a retail investor, and an average American who wants to make the most out of their money or as Mike and I constantly remind each other, the goal is to minimize expenses while optimizing savings.

“With real money comes real expenses”- Will Hershon

We love the challenge of investing and the rewards you can get from it and one day hope to have our own fund. But for now, we are working every day to save more, learn more, and invest wisely. I have goals to own real estate, mostly rental properties, and I’m going to document my experiences with that here. Mike wants to figure out better ETF and fund strategies that out perform the current indexes for lower costs.

We both really believe in the firm foundation theory of investing while Mike sometimes branches out in the more technical branches of algorithmic trading, considering his background in engineering, this isn’t surprising.

For now we’re both focusing on filling this website with the best information possible. I’ll be the first to admit we are going to make some mistakes, but we will also be the first people to fix them. We’re learning, just like you are. But we’re willing to share our successes and our mistakes. If we blow our budget on a night out we’re gonna write about how we fixed this in the future. When we buy our first rental property we’re going to write the process and what we looked for. Eventually we’re gonna have our portfolios up for you to see. Our views on investing, and the markets will be here as well.

The Modern Piggy Bank is going to focus on four major categories. Investing, Saving, Passive Income, and Education. Investing as you might have guessed is going to be focused on the markets and real estate. Saving is going to focus on the best ways to save money and the most efficient vehicles for doing so. Passive Income will take a little longer to build out as we believe that’s going to be focused more on maintaining the real estate portion of your portfolio, but I promise you, we will get there. And finally, Education. Education is where we will review and talk about the books we’re reading and the ideas we’re learning about, anything and everything helps when it comes to making smarter decisions with your money.

At The Modern Piggy Bank, we’re not going to give you some advice on how to save more from someone who heard it from someone’s brothers friends old roommate and how they managed to move out of their 500 square foot apartment and upgrade to a luxurious 700 square feet. We are going to give you our actual experiences right from our own lives of how we handle money, grow it, invest it, and save it. You’ll grow with us. No doubt, we will make mistakes at times. But we aren’t claiming to be perfect. We claim to be on a path few choose to actually follow yet all talk about.

Knowing what to do with your money is hard. I get it, and all of us at the Modern Piggy Bank struggle to some degree to save our money and make it go further. That’s why we set this website up. But when you get down to the bottom line, saving money isn’t rocket science (although Mike actually does rocket science).

If you’re looking for ways to shop the best deals on luxury items or make a quick buck by taking surveys online, this isn’t the website for you. There are plenty of great websites out there that will tell you how to do this. We are focused on other things, real ideas, true techniques, anything and everything that will help you grow your wealth and yourself.

Actual experiences right from our own lives

And with all that, welcome to The Modern Piggy Bank.

-Will Hershon

-Mike Andriopoulos

Rich Dad Poor Dad

Hotly Debated. Ultimate Rating: 5/10

Our Rating: 5/10

This relatively short read on the importance of personal finance and investing has us in a huge debate here at The Modern Piggy Bank. One of us loves it and thinks it is a great start to learning personal finance and investing while another one personally hates it and think there is no practical advice. Regardless, here is our unbiased review.

The book reads as a series of short stories littered with financial advice. It follows the authors life from childhood to adulthood and sheds some light on how he was able to build his fortune through the years. Kiyosaki will routinely talk about how he consolidated expenses while seeking investment opportunities and follow it with practical knowledge of finance and accounting that can be applied to daily life.

This book can be an amazing starting point as to how to get in the mindset of wealthy money minded individuals. The ability to look at someone’s experiences and learn how they came up with an original investment idea while minimizing personal expenses can really cause one to re-evaluate what they are doing with their own finances. Kiyosaki was born into a middle class family that was us savvy with their finances, but his mentor was a prominent businessman, so the book allows you to see what separates a money minded person from the average.

What the book lacks is sound financial advice, especially when it comes to investments. Kiyosaki built his wealth during much of the 80’s and 90’s when the regulatory landscape was a bit more lax than it is today. The book itself was published in 2001. He will talk freely about securing loans with ease and purchasing low risk financial instruments with dubiously high returns. At The Modern Piggy Bank, we both agree we would not invest in most of the strategies he talks about in the book if they were even still possible.

Overall, the book has sold more than 32 million copies, has been a New York Times bestseller, and has been endorsed by many celebrities and news outlets. On the flip side, critics will say it provides no sound financial advice and reads as a cookie cutter self help book.

We personally believe there is no such thing as a bad book. You can purchase the paperback for less than $10 on Amazon or get the book for free if you google “Rich Dad Poor Dad PDF”. Pick up a copy and let us know what you think.

Making The Most Out Of Your Savings Account

Know How To Make The Most of Your Savings

Why You Have A Savings Account

It’s always important for anyone and everyone to make the most of their money. Have it go further, spend it better, save it, and ultimately just have more of it. When most people think of their money they probably think how they can save better and how they can make more. Sure, there’s ton of online advice that shows the things you can do every month: create a side hustle, take some surveys, or get cash back on the things you were going to buy anyway. Yes, we admit these are all great things and would never discourage someone from working to make an extra dollar but like Warren Buffet said “If you don’t find a way to make money while you sleep, you will work until you die.”

“If you don’t find a way to make money while you sleep, you will work until you die.”

For most people they only make money while they are awake and at their jobs. So lets start talking about simple ways to make money while asleep. Because if you have to put in extra hours to make more money you’re just trading your time for that money. Enter savings accounts and compounding interest. Defined by Buffet as the “8th wonder of the world” (We’re gonna reference Buffet a lot through our articles, he is one of our main role models), compounding interest is the vehicle that lets your money make money and that money make even more money, all from the safety and security of your FDIC insured bank account.

You Already Have A Savings Account, So Who Cares?

All savings account aren’t made equal though and in the current environment of rising interest rates it’s good to look around and really understand how much your money is growing without effort or risk.

Chances are you probably have the same bank your parents set up an account for you at sometime early in your life, or you went to a college town where the options were few and had to open an account at the popular bank there. Our school gave the option of opening a college account right from orientation that would like up with our student ID’s. Nothing says starting College off right than a new bank account and maybe even a new credit card for all that responsible drinking you’re going to be doing.

There’s plenty to say good about the big national banks but when you look at the rate of interest they return on your savings, they are anything but at the top of the pack. I recently moved to a new city and neither bank I had accounts in in the North East existed down south so I took a dive through online articles comparing bank accounts and savings accounts while also hitting the pavement and going to local credit unions to try and decide what’s right for me. And that’s a tough question to answer and we advise you to think long and hard about what you need from a bank or credit union before you switch. This part takes a little more thought and we caution that you should not just jump in to a new account.

Now, I know it seems a little daunting but you can have your savings in one place and your checking in another. Personally, I use Marcus by Goldman Sachs. They offer approximately 16x the national average for interest on savings accounts and have incredible ease of access that everyone will love. There are no fees attached and your money starts compounding daily, starting the very first day your deposit hits their accounts. But there is a slight catch. Marcus only offers savings accounts and personal loans so you will have to keep your checking elsewhere. For me, dit was easiest to choose the local credit union that has an unbelievable ease of access in my city and also lets me tap into the Credit Union Network of ATM’s anywhere in the world, giving me quick and easy access to cash, at no fee whatsoever. There’s also the added benefit of credit unions that they usually offer lower rates on their big purchase loans such as home and auto and as someone looking at getting into real estate investing, this was extremely important to me.

Getting back to interest however, it’s what allows your money to grow from $100 to $101.85 in a year (if you use the current rate offered by Marcus) without even thinking about it. Yes’m, I realize that’s not a lot but let’s say you start with $1,000 in savings. You have a compounding interest rate of 1.85% and you don’t plan on touching your savings for at least 3 years. Without making any more deposits you will make an additional $57. I know, I know, this doesn’t seem like a lot but expand

this formula out and you’ll really see the benefit and magic of compounding interest and shopping around for the best rate.

Bringing It All Home

Let’s say you just graduated college, and for us, we just did. We’ve got $4,000 that I didn’t blow in college that I saved up from my internship. I’ve got my first job and I’m making enough to pay the bills and have some left over. In a conservative scenario, after accounting for my expenses like my social life and a dog, let’s say I can contribute $300 a month to that already $4,000 in savings. At the end of 3 years, if no withdrawals are made, I’ll have made an extra $521 dollars. Way outpacing the current rate of inflation. Going even beyond those three years and you;’re compounding on all of that as well. And that’s the magic of compounding interest.

It won’t get you rich quick but it will help you grow over the long term and that’s what the Modern Piggy Bank is all about.