Netflix Method for Building Credit

Sticking to a budget is easier when you know how much you are going to pay each month.  That’s why subscription services are so great, you don’t have to budget in the number of times you use the service.

Just like the Gas Method of building credit, my completely un-patented and unoriginal “Netflix Method of building credit” is a way to keep credit card usage consistent. Putting a subscription service on your credit card could be a good way to budget your credit usage, but like all credit tips, it can come with its potential risks.

How to do it?

1.) Set your payment method for Netflix (or any other subscription service) on auto-pay with your credit card

2.) Use Netflix (as we all do)

3.) Remember to pay it off every month!

The 3rd step is the real kicker. If you forget that you paid for Netflix on your credit card, the payments could add up and gain interest! Thankfully, a Netflix subscription is cheaper than a tank of gas a month, so forgetting it isn’t going to blow your credit if you only forget once. But forgetting for a year or more could easily begin to put you hundreds of dollars in debt.

Is this right for me?

If you like having a steady, consistent budget and have a good memory then I think this is a great budgeting technique. But, I do know it’s already easy to forget about auto-renewing payments and having one on a separate card than your regular account does make it hard to remember. Someone on a tighter budget may not find it worth the hassle of remembering.

Why You Should Take the Change in Your Tip Jar.

Working a job where you make tips is one of the most satisfying thing I have ever experienced.  Even if it’s just a few cents or a dollar every purchase, it quickly adds up.  When I first started making tips as a barista, I would always ignore the change at the bottom of the jar unless it evened out to a full dollar. This small daily habit could have ended up making me lose out on a considerable amount of money if I hadn’t noticed.

Below I have a chart showing how much money you could save in a year just by grabbing the leftover change at the bottom of the jar.

Days/week Cents Total in a Year
4 $0.40 $83.20
4 $0.25 $52.00
5 $0.25 $65.00
5 $0.40 $104.00

Although this may not seem like a lot of money compared to how much you make in dollars, you have to calculate the marginal cost/benefit.  Marginal cost is how much it burdens you to do something.  Marginal cost can include money, time, and stress. In this case, the marginal cost is small, because it’s money you have already earned.  One inconvenience is getting the change into your bank account or into a more liquid form. But this can easily solved with Coinstar, or finding a bank with a coin machine. Just get a large jar in your house to keep your change in and convert it to cash once a year.  The marginal benefit can be substantial, depending on the number of days you work.

Here’s the formula you can use to calculate how much you could earn:

Tips in a year=(Days working)*(52)*(Average change)

Do you grab the change in your tip jar? How much could you earn?

First Credit Card Mistakes To Avoid

Getting your first credit card can be a scary experience. Credit card debt can grow exponentially if you’re not careful and can affect your ability to buy a car, a house, or even get a job. Ideally, spending money you don’t own is never a good idea, but it’s not always practical.  Whether for building credit, or making end of month payments, here’s the most common credit card mistakes new credit card users make.

1.) Carrying a balance month to month.

I’m not sure what started this myth, but it is NOT TRUE. Carrying a small balance from one month to the next does not help increase your credit score.  For the best results, pay off each balance in full at the end of the month.

3.) Ignoring your credit utilization rate.

Even if you pay off every cent each month, you may still be hurting your credit score.  Credit companies also like to track that you are not using too much of your available credit.  Although this has less of an impact on your score compared to other things, lenders want to see that although you have credit available, you are not in a position to be using too much too often. If your credit utilization is above 30%, call your bank and ask for a raise in your available credit. This way, you can keep your spending the same and reduce your credit utilization. However, raising your available credit may result in a hard inquiry.

4.) Too many hard inquiries.

If you apply for a new credit card, increase your available credit, or apply for a loan, you will likely have a hard inquiry reported on your credit report.  A hard inquiry negatively affects your score because it shows that you are gaining too much credit too fast.  Don’t worry, because a hard inquiry is only reported for about 2 years.  Checking your credit score for non-lending purposes (like if you are using an app such as CreditKarma), is a soft inquiry and will not affect your credit score.

5.) Not tracking your credit.

In this day and age, there is absolutely no excuse for not knowing your credit score. Tracking your credit score is the best way for you to learn how changes in your spending affect your credit.  It is also important because the credit bureau might make a mistake in your credit that could go undetected until you need to take out an important loan.  You can dispute errors on your credit card, but only if you find them.

6.) Overvaluing the rewards.

Almost every credit card company offers rewards based on how much or where you decide to spend your money.  Any program that encourages you to spend money in order to make money should make you very nervous. Credit card companies offer rewards because they know it encourages most consumers to spend more money than they initially would.  A 3% cash back rewards may sound like a lot, but often times you will spend more than 3% in anticipation of rewards.

 

What’s been your biggest credit card mistake? What helps you stay on track of your credit?

How to Stop Compulsively Checking Your Cryptocurrency Wallet

Owning cryptocurrency can be torture when you are constantly seeing fluctuations in your coin’s value.  If you find yourself constantly watching the value of your cryptocurrency, check out these 4 tips to help calm your paranoia.

1.) Remind yourself to think long term.

When cryptocurrency prices fall, it’s easy to immediately feel like you have lost money.  This could cause you to sell your coins as soon as the price drops below where you bought it.  When prices do fall, (and they most likely will) just remind yourself that cryptocurrency is incredibly volatile and will likely go back up in the coming days or months.  The money isn’t a lost until you sell it for a loss.

2) Think of your cryptocurrency as money already spent.

Although cryptocurrency prices have historically risen after every fall (not including the dip we are currently in obviously), that is based on a relatively short amount of time. Even Bitcoin, the oldest cryptocurrency, has only been around since 2009.  Big gains come with big risk, and cryptocurrencies are definitely a big risk.  Invest as much money as you are willing to lose.

3.) Keep cryptocurrency a specific (and small) portion of your portfolio.

The biggest problem when I began buying cryptocurrency was I never knew when to stop buying.  Since prices were falling, it always felt like a good time to buy.  Although this wasn’t a horrible mindset, it easily led me to investing twice as much as I intended.  Decide how much you want to invest, and what portion of that you want to be in cryptocurrency.  This could be a set amount of money that you convert to cryptocurrency and then hold, or small chunks every few paychecks. Remember, never keep all your eggs in one basket.  And, no, just investing in many types of cryptocurrency does not give you a diversified portfolio if that is all you are invested in. Don’t stop putting money in stocks just because you are also investing in Bitcoin.

4.) Invest smaller chunks over a wider period of time.

Even people who closely watch and analyze cryptocurrency prices often make mistakes or incorrect assumptions. Just like with stocks, it’s often a losing game to try and time the market.  Putting smaller amounts of cash in over a wider period of time will help lessen your fear of missing out if prices drop.

Be careful of putting too small of sums in too often however, because many wallet companies-such as Coinbase- have a flat fee for every cryptocurrency transaction.

What tips have helped you stop the endless cryptocurrency stress cycle?