I wrote a post yesterday about how Mrs Credit Card and myself spent the whole day doing our taxes. After the exhausting day, I sat down in the evening and reflected what I have done right in my finance organization and what I could have done better.

There a some things that I am pleased to have implemented. One is that our bills are automatically deducted from our bank accounts. Our utilities are charged to our credit cards so that we can earn more rewards points or cash rebates. We contribute to our retirement plans and also contribute to savings in our taxable accounts.

What we have not done so well is to budget specifically for certain items. For example, we had a basement leak early in 2007 which set us back $6,000. That was an unexpected expense. We also took a few vacations last year which we did not budget. But we still managed not to dig into our savings plan or incur any debt.

I also realized that I hate actually sitting down in front of a spreadsheet and budgeting. I have to force myself and find the right time to sit down and actually do some budgeting and monitor our finances. What also tends to happen is that occasionally, Mrs Credit Card would go on a little shopping binge.

At the beginning of last year, I asked Mrs Credit Card to take more time looking at our budget. She did not exactly take it to mean that she was in charge. She volunteered to categorize my work receipts (which I have failed to hand it to her on time). However, there were many times when she expected me to sort out our mails and I wondered my she couldn’t do it. There were also other times when I asked her how we were on the budget and she said she has not looked at it for while!

After doing our taxes almost in the last minute (not a deadline last minute), I came to realize that one of us has to take over the role of a CFO in our household. And I think that person will not be me but Mrs Credit Card. The reason is that I hate doing mundane things like filing my receipts, checking our expenses etc. I would like that to be done and presented to me! (like a CEO!). But I’m sure Mrs Credit Card will accept the role, but she also has to look after our 3 kids . And she has a couple of other sites that she runs! So what gives.

I think we might have to hire a part time book keeper. Or if we decide not to do so, one of us (more like Mrs Credit Card) has to assume the full role of our household CFO position and be in charge of everything, from budgeting, monitoring our expenses, reporting, checking our mails, filing our receipts and forms and all that stuff. I’ll let you know of the outcome of this, but I certainly feel that our present situation where we both sort of look at our finances together, but not being as engaged as we should be is not the ideal situation.

Share your thoughts on this here.

I just spent the whole day with Mrs Credit Card doing our 2007 taxes and I can say that I absolutely hate it. I thought it would ages but it turns out that all it took was a good six hours. Next year, it would be much simpler. But here were the mistakes I made.

1. Not putting everything on a spreadsheet every month - I did keep my receipts in a folder organized by month. But I had failed to write behind every receipt the purpose and name of person I had met (I’m in a sales job).

2. Not having my work calendar (which is Microsoft outlook) accessible through my home PC - This made matching the receipts to events really cumbersome.

3. Not separating my credit card expenses properly - Regular readers will know the credit cards I use. But today, I realize that I have been using my credit cards effectively (not in terms of maxing out rewards). Our present situation is that we charge almost everything to our credit cards (and pay off in full). But our expenses can be broken down into household, my work, and our web business. Reconciling our expenses with our receipts becomes a nightmare.

How I plan to improve the situation this year

1. Input all my expenses in an excel spreadsheet weekly - I really hate doing things like that but I think I’ll have to commit to this to make our lives easier. It will also be easier to monitor current expenditure.

2. Carry a small receipt file wherever I go - I will start carrying a small receipt carrier in my car wherever I go and put my receipts in there immediately.

3. Get access to my work computer from home - I do not work from home (seldom anyway). For the most parts, it is family time and writing this blog! But I’ll speak to my IT guy to get this set up so that Mrs Credit Card can also see my schedule and I can work on the expenses together with my schedule at home.

4. Use one credit card for each of my expenses - This means I will start using one credit card for my work, one for our web business and one for our household expenditure. I’ll update my strategy for this in a later post.

5. Getting EZPass - Well, at least in Pennsylvania, it’s called EZPass. Reason I want to get it is to save time as I can just drive through the toll booths rather than having to stop. But also so that I can see how much I spend a year on the road without having to keep tons of receipts.

Other things I am considering

1. Hiring a book keeper - I’m sure Mrs Credit Card is against this because she has volunteered to perform this role. But this is such a mundane role that I think we could spend out time on more enjoyable stuff. I’ll have to check and see how costly it is to hire one to come just once a week!

2. Getting NeatReceipts - Neat Receipts is a cool gadget that lets you scan in your receipts so that you can store your receipts in your computer. The IRS accepts these electronic records. A couple of my friends have them and it is totally cool and neat. No more chunks of receipts? Need to discuss with Mrs Credit Card again.

Well, those are my thoughts at the moment. How are you folks out there organizing your expenses to make your life easy during tax time?

I said this a few time, but I’ll say it again. The days of great 0% APR balance transfer deals are over. Why? Simply because of a couple of reasons.

1. Offer 0% teaser deals have not resulted in creating customer stickiness or loyalty. Instead, when the 0% deal expires, they simply get another 0% deal.

2. As a result, it is becoming a money proposition to offer these deals.

What are credit card issuers doing?

Well, credit card issuers are just not going to just pull offers from the market. So this is what they are doing.

1. Rather than waiving the balance transfer fee for the introductory offer, most cards now charge a balance transfer fee for the introductory offer.

2. Many cards have now removed the cap from balance transfer fees. Traditionally, most charge a fee of 3% of the value of the balance transfer and then cap the fee at $75. Now, many cards do not cap the BT fee and hence an unsuspecting new card holder may end up paying a lot for a large balance transfer.

0% BT Deals are still important to consumers

I feel that in today’s environment, 0% deals are more important because banks are really raising people’s rate for no reason. I have heard more horror stories from friends with 700+ credit scores, but having their APR raised to as high as 29%! They have since got new cards to transfer their balances. But you certainly have to be careful of balance transfer deals because of what we just talked about! So I’ve compiled a list of balance transfer cards to avoid :

List of Zero Interest Credit Cards to Avoid

No cap on balance transfer fee!

Most citibank credit cards including Citi Platinum Select Card, Citi Diamond Preferred Card, Citi Diamond Preferred Rewards Card, Citi Home Rebate Card.

Most Bank of America Credit Cards including the Worldpoints cards and the Platinum Visa Card.

Issuers who still cap their balance transfer fees

Chase - Most cards cap their balance transfer fees to $75.

Discover - They cap their balance transfer fees to $75 as well.

Cards with good balance transfer deals

OK - there are still a couple of gems lying around.

1. The Discover® More(SM) Card offers a 0% deal on balance transfer for 12 months and caps the balance transfer fee to $75.

2. The Chase Platinum Visa® Card also offers a 0% deal of up to 12 months (depending on how good your credit is) and also caps the balance transfer fee to $75.

2. Sometimes, paying a BT fee is actually OK. Well, if you have a large balance transfer that you want to do, then perhaps, you should consider the Advanta Platinum BusinessCard with Rewards. This is the only card that offers a 15 month 0% deal. (Hint : you do not need to have your own business to get this card. You’ll simply be treated like a sole proprietor).

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My friend Dru does not carry any credit card debt. He uses his credit card wisely and yet when I ask him what credit cards they carry, he says he got a card from a regional bank a long time ago and worse of all, they were paying an annual fee.

This is when it really bothers me. For those who do not carry any credit card debt, using credit cards actually can save you money. How? I suggested that he consider getting a cash back credit card with no annual fee. Here’s why I think it makes sense.

Most cash back credit cards do not charge any annual fee. You will usually earn 1% rebates for every follar that you spend on the card. The better cards though, pay you more than 1% rebates on selected expenditure. For example, the Chase Freedom Card allows you to earn 3% rebates for certain expenditures like gasoline supermarkets, restaurants etc. In fact, the card has 15 categories which they will pay you 3% for your 3 biggest expense in the month among the 15 categories!

Citibank for example, has the Citi Professional Cash Card, which allows you to earn 3% rebates on gasoline, certain business expenses and wireless phone bills. The American Express Blue Cash lets you earn 5% rebates on gasoline, supermarket and drugstore expenses once your annual expenditure exceeds $6,500.

So as you can see, with the proper use of cash rebate credit cards, you can actually save money on your daily purchases.

Some cards like the Discover More Card gives you a 5% to 10% discount with you shop with certain partner merchants. Some of their partner merchant includes places like Barnes & Nobles etc. Hence, this is another card that allows you to get cheaper prices at certain stores.

So if you do not carry any credit card debt, but have card that does not have either any reward program or cash rebate program, then I strongly suggest that you get a cash back credit card or cards. You can simply your choice by using our cash back credit card calculator to find the most appropriate card for your spending levels.

Pay Your Other bills with Your Credit Cards

You can save even more money by paying your bills through your credit card. The best thing to do is to set up your credit card to autotically pay off your utility bills every month. Some cards like the Citi Dividend Card allows you to earn 2% rebates on utilities.

Bottom Line : Get a Cash Rebate Credit Card

I have alway felt that getting a cash back credit card is one of the smartest choice you can make with regards to your credit card. You can save money and often get discount on certain merchants with the credit cards. If you pay your bills on time and do not carry any balance, it would be criminal not to get one.

When people think of debt, most will immediately think about credit card debt, unsecured personal loans. In previous articles, I have always stated that I think that my mortgage is such a burden. But the more I think about it, there are so many other obligations in our lives that these feel kinda like having debt to me.

Property Taxes - As long as you own your property, you will always have to pay property taxes. This is one tax and payment you can never get rid of unless you do not own your home. But then, you have to always pay rent!

Long term care insurance - every one of us needs to hedge against the risk of having to need long term care. But once you get your long term care insurance policy when you are in your late 50s or 60s, it becomes another obligation. That is one of the “unexpected expenses” when someone reaches retirement age.

Health Insurance - how do we get away from this one?

Life Insurance Policies - if you have term insurance, your payments will stop once the term ends. Just pray that you will have saved enough so that you will not reach anymore insurance. But insurance policy is another one of those expenses that we have to live with.

Auto/Home Insurance Policies - Yes, you will always need this as long as you have a home and car, you will have to bear with these payments.

How to eliminate some of these expenses?

1. Pay up your policy for your life insurance - Yes, you do not have to paying premiums forever. You can structure your policy such that the policy will be paid up after a certain number of years. Your premiums will obviously be slightly higher.

2. Pay up your long term card insurance policy - Yes, you can actually structure your long term care policy such that your policy is paid up after say ten years.

3.Pay off your mortgage - every one will eventually do that, but you can speed up the process by paying more a month towards principal payments.

4. As far as auto insurance, home insurance and property taxes, you cannot really get away with it. It’s just like expenses to put food on your table. Sometimes, it seems like you keep paying taxes for your own life!

Have you ever co-signed any credit cards? (especially for your kids). Or even a student loan? Well, if you are thinking of co-signing either a credit card or student loan for your kid, make sure you teach them the importance of paying their interest payment on time. This is because if they do not pay their bills on time, your credit will be affected.

Remember, when you co-sign a loan or credit card, you are essentially guaranteeing their debt.

Here is a story of someone I know : This person has a mortgage, a home equity loan, credit card debt and has co-signed his son’s student loan. Unfortunately, his son has always been inconsistent in paying his monthly interest on the loan. It was only much later that my friend realized that his son’s habits has hurt his credit score!

It was when my friend tried to refinance his mortgage a few years ago that he found out that his credit score had taken a nose dive. He could not refinance and is still paying a relatively high interest rate.

Right now, he faces some risk that credit card issuers may actually increase his rate (the price of having bad credit).

Remedy - My friend has since spoken to his son about this. This was his solution. He pays off the interest every month and his son then pays him. This way, he ensures that the monthly interest will be paid on time. His credit score gradually improved.

Moral of the story - Be very careful if you co-sign a loan or credit card, because it means you are also responsible for it. It should also give you a couple of incentives to :

1. Save for your kids college education - It’s better to save and not having to saddle your kid with debt before they even start work. It may also save you the hassle that my friend went through with a ding to his credit score.

2. Educate your kid on the importance of paying on time and the responsibilities when you are a debtor. I think very few parents actually do this. If you do co-sign a credit card, you’d better teach them about this.

Almost everyone carries some form of debt. Here is a run down of the most common debt.

1. Student Loan Debt - Well, unless your parents fully saved for your college education, you will be stiffed with this one. My friends who are doctors and lawyers have an even higher debt load from their law school and med school. Even if your parents funded your college tuition, it is highly unlikely that they fund post grad studies. And these loans are huge!

2. Credit Card Debt - Surprise surprise….but credit card debt is so common these days it is simply unreal. In fact, news reports has it that people would rather pay off their credit card debt than their house these days! Of all my friends who carry credit card debt, most have about debt on 5 cards. Yes, 5 cards. Guess if you have credit card debt, then chances are that you have balances on more than one card.

3. Home Equity Line of Credit - Many people I speak to have a hone equity line of credit these days. Most was used for home renovations - which to many people seems like a good investment.

4. Mortgage - Don’t we all have one? Wish it would go away. But we were always brainwashed that your home was an “investment”! To me it feels like a recurring expense! Traditionally, one’s home mortgage was a 30 year fixed rate mortgage where your monthly payment is fixed. These days, they are so many variety that many have fell for low teaser rates that increase dramatically at the reset dates!

5. Auto Loans - Well, some of us have auto loans, and some of us lease. For me, I’d rather pay cash on a car (a second hand car). Cars are depreciating assets (with the exception of vintage cars), so taking debt on a depreciating asset simply does not make sense to me). Those who change their cars often tend to lease. To me, having no monthly payments is the best thing.

6. Securities Margin Debt - I know some friends who have security margin accounts and use them to pay their taxes! They figured that they would rather have their money working harder for them rather than paying it to Uncle Sam.

7. Insurance Payments - Huh! Are these really debt. To me, they are on-going expenses and hence still feels debt to me. One way to get around this is to have permenent insurance and have one such that you can pay up in X number of years.

In my opinion, we are now at a period of potential asset deflation. The US housing market has been in a decline for the last 3 years. The decline started in 2005. The economy is going south and many smaller businesses are finding it harder to get financing because of unfavorable business conditions. Banks, who have taken huge earning hits in the sub prime mortgage and credit related losses and not aggressive in lending.

The general rule of thumb is that you only take on leverage on an appreciating asset. That is why when the housing market is on fire, or even in normal market conditions, taking on a mortgage makes sense because you are taking leverage on an appreciating asset. You also get deductions on your interest payments.

The same thing happened in the private equity world where huge leverage buyouts in an easy credit environment coupled with an OK stock market made a lot of sense.

But when you take on leverage on an asset which is declining in value, it becomes a double whammy. You end paying so much more for an asset which does not appreciate (that is why I never ever took out a car loan).

So what implications does this have for our most common debt - credit card debts and our mortgage?

Well, firstly, we should always try not to carry a balance and have credit card debt. That is because you are carry debt based on consumption that adds no value to you. You are not borrowing to finance an asset (though some people use their credit card lines for their business). As for your mortgage, I think now is the time where you should pay off as much and as quickly as possible. The housing bubble will take a while to reach equilibrium and experts estimate that prices need to fall another 15% to 20% to reach “fair values”.

So if you have good credit scores and you have credit card debt, I suggest you attempt to pay them off as soon as possible. Set up a plan and stick to it. You may want to consider getting a 0% APR balance transfer credit card to speed up your debt reduction plan.

If you are paying anywhere north of 6% on your fixed mortgage, now is the time to consider refinancing (you can check out sites like LMB Refinance Loan to get the best rates. Then consider using the extra cash you have to pay down your principal faster.

Now is certainly not the time to have lots of debt, especially when asset values (aka your home) is declining. If you have not given too much thought to this, I really think now is the time to really get your debt reduction plan on schedule.

OK - a little off topic from the usual credit card stuff that I like to talk about. Back to basic finances - your investment portfolio.

The global equity markets have got on to the very bad start. Now the question is what do you do? Conventional says you have to have a “long term view”, don’t panic, continue to invest monthly. In the “long run”, every thing will be OK?

Is that really the case? Well, from the peak of the markets in the early 2000s to the lows, the S&P index (a portfolio of highly diversified US stocks) declined 50% in value! I know people who are still trying to recover from that period. For someone in their 20s or 30s, maybe “sticking it out” will work. But what if you are in your 50’s and you cannot afford to take a big hit in your portfolio.

Here’s my view on things and what I intend to do this year.

1. I am reducing my risk. Right now, my portfolio is 80/20 - 80% stocks, 20% bonds. I thought that I have a decent risk tolerance. Turns out that that is not the case. So I am reducing my allocation to equities. How much? Probably down to 50%. So it will probably be a 50/50 portfolio soon.

2. While this may go against the grain of conventional wisdom (stay the course), I see nothing wrong in being conservative in what is looking like the end of the cycle. The worse that could happen is that I under perform the market for one year. But if my views are right, I will be much better off with a less aggressive portfolio.

3. What most mainstream magazines do not mention is that if you outperform in a bear market, you will not need to have fantastic returns to beat inflation when the market turns. But the people who were indexed in the early 2000s had a mountain to climb! This is the concept of risk adjusted return. All professional institutions adjust that portfolio allocations periodically. The idea of asking normal folks like to just adopt a cookie cutter approach to invest - pick an allocation and stick to it through thick or thin is simply ridiculous to me.

4. If you have a “target date fund”, think about reducing your risk to stocks. The problem with these funds is that all they do is to consider your age, but not your risk tolerance. What you are in your 30s but have very low risk tolerance? Should your portfolio be in all stocks? I think not.

But anyway, this is what I’m doing, making some strategic asset allocation decisions. What are you doing with your investments?

I know of people who have 20 credit cards. They have applied for them just for the sake of it and many times treat them like collectors items.

Personally, Mrs Credit Card and myself carry three credit cards and here are the reasons for us using them.

1. Amex Platinum Card - Years ago, my first card was the Amex Green Card, which was then upgraded to the Gold card. About a year and a half ago, I decided to upgrade to the Platinum Card. There were several reasons : Since I call myself Mr Credit Card, I wanted to write about the Platinum Card. But how could I write about it if I did not have the card. So rather than pay the $150 annual fee for the gold card, I forked out $395 for the card (excluding Mrs Credit Card’s supplementary card!).

Having the card enables me to actually write about my actual experience with the card and their concierge services etc. For example, I wrote about my experiences with the american express domestic companion ticket. I also wrote about how Amex Global Assist helped me when I left my keys in the car.

The second reason I got it was partly because of an ego thing. It actually feels good flashing this card (not always, but sometimes!).

But seriously, I used to travel and fly frequently and the membership rewards points allows me to transfer points to different airmiles. I also like using points for other cool stuff on the program. After some snooping around, I found out that the membership rewards program was the only one that carried the most Apple products compared to other reward programs.

2. Blue Cash - Since I started this website and reviewed credit cards, I’ve come to realize what a cool card the blue cash is. Every since the Citi Dividend card stopped paying 5% rebates with no tiers, I felt that the Blue Cash was probably the best cash back credit card for consumers in the market. Since I felt it was the best, I decided to apply for it and till this day, there are no regrets. After building my cash back credit card calculator, I keyed in my annual expenditure on various items and found that the Blue Cash paid me the most rebate as well. Hence, it was the right decision.

Twice, I accidentally missed my payments and twice Amex waived the late charges and interest charges on the account of my good and long history with them. I also like the fact that the rebates are automatically used to reduce your credit card bill at the end of the last month of your calendar.

Right now (because of the Amex Platinum Card), I’m probably not optimizing my use of this card. But I still use it at gas stations, supermarkets and drugstore to get my 5% rebates!

3.Chase Flexible Rewards Card - I got this card simply because I wanted to review the reward program but Chase does not publish them on the website! I called them for a brochure but they said I could only get one when I have the card. But I told them I need to see the reward program to decide if I wanted to get it! Still they said no. So I applied for the card.

Frankly speaking, I only use this card if a place does not accept Amex. The reward program is actually quite unique in a couple of ways in the airline ticket rewards. As with a typical reward program, you can exchange points for airline tickets. But the Flexible rewards program also allows you to exchange points for Continental One Pass Miles, United Mileage Miles and also British Airways Miles. The ratio isn’t exactly one for one, but given that you do not have to pay any annual fee for this card, it looks like a back door way as an airline card but with no annual fee especially if you are a frequent flier with any of this airline.

So that’s it. These are the three cards I use at the moment. I wanted to get the Capital One and Discover cards but my close friends have that. They give me their passwords so that I can login, check their reward programs and write proper reviews for these card.

So which cards do you have and how do you use them?