Personal Profitability

Personal finance for hustlers and entrepreneurs

Banking

Automatic Credit Card Payments

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Most credit card companies offer “automatic payments”, where you can sign up for automatic withdrawals of either your minimum payment or full balance every month. Is this a good idea? This post will look at the big benefits and big drawback of automatic credit card payments.

First, the benefits. If you pay your credit card automatically, you will never forget to pay. Paying in full will prevent any interest and late fees from ever happening. This can save you money. If you forget and pay late, it will cost you a lot of money. Automatic payments are a safeguard.

The drawback, what if you forget that the payment is happening and do not have enough money in the linked account? If you have $100 in your checking and your credit card withdraws $110, you will get hit with a bank overdraft fee! That could be worse than a missed credit card payment depending on the circumstances.

Automatic payments are right for some people. If you keep a high balance in your checking account, automatic payments are right for you. If you keep low balances in checking and keep higher balances in a savings account and do a transfer each time you pay your credit card, automatic payments are probably not right for you.

I do not do automatic payments. I prefer two payments per month manually, as I discussed a couple of days ago. I do not make payments with checks. That is outdated technology. If you still do that, it might be time to sign up for Internet banking and online credit card accounts.

Note: Did you incur an overdraft fee or a late fee? Consider using Cushion to help get your money back! Click the link to learn more about this app.

Leasing vs. Buying

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At some point, you are probably going to need a new car. For young people, this is usually the first major purchase (thousands of dollars) that you will make. You have three options: Buy in cash, lease, or buy with a loan.

The best option is to just buy the car outright in cash. This will be the least expensive option, as there is no interest or fees associated with the purchase. This, however, may require you buy a less expensive car. It is up to you whether or not this is worthwhile.

Leasing is another option. Do not lease a car. I will say that one again to make sure you heard it. Do not lease a car! Leasing is renting. You have no ownership in the car. At the end of the lease, you have nothing and have to give the car back. Don't pay someone to borrow a car.

The third option is to take out a loan. Loans require a down payment and a good credit score. I have a loan on my current car. Many people hate debt, that is okay. If you feel that way, don't take a car loan. I, however, could not afford a nice car at the time, but could afford a big chunk of it. In addition, I took a longer term loan to lower my payments. Even though I have low payments, I usually overpay my loan. I paid double my monthly payment for a while, and now pay about $80 extra per month. These accelerated payments help me lower my interest payments over the life of the loan. I am about a year ahead on a five year loan (one year in).

So, you really have two options because you don't lease. You can pay for a car in cash or take out a loan. Cash is an obvious first choice. Loans do have a perk though. Installment loans are great for your credit score when you pay on time. My score has gone way up since I started with my car loan. However, there are interest payments.

In the end, it is up to you. Either way, make sure it is a car you can afford. If you don't make a lot, don't buy a super expensive car. People do not become wealthy from spending money.

My Automated Plan

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I keep telling you how you should invest, stop spending, and do more for yourself financially. I can not justify doing so without doing so myself. I want you all to see how I am doing it today.
That is my breakdown. You might note that I did not include a budget for my living, fun, and other savings. That is for next time. I did want you to see, however, that I do put 10% into investments first. The trick to automating your investing is that you can live on what is left. If you are feeling a crunch, make a lifestyle adjustment.

A very rich man once told me that the trick to being happy is living below your means. This multi-multi-multi millionaire drove the same Toyota Corolla he bought in the 1980s over twenty years later.

Now that you have seen how I do it, it is time to do it yourself.