Credit Cards Guide

Here is an introduction from Editor-in-Chief Daniel P. Ray:

A year ago this month the financial industry nearly collapsed.

AIG. BofA. Citi. Lehman Bros. Goldman Sachs.

All familiar financial pillars whose foundations crumbled. Some fell, others were propped up with bailout money and unprecedented, McGuyver-like reaction from the Fed (“Hm. I have some duct tape, and this toxic asset sponge and this printing press. Here I come to your rescue, capital market!”). Many say it saved us from Depression, the sequel, while those who drink their capitalism neat rail against the Fed actions as unwanted mixers, diabolical socialist plots or worse.

A year has passed since. Though unemployment remains stubbornly high and 94 banks have failed so far this year, Fed Chairman Ben Bernanke was hopeful enough to say last week the recession is “most likely” over. Wall Street and the national economic engine is still turning, though still frequently misfiring and spitting sand out the tailpipe.

But back here on Main Street, there’s no jubilation. No one’s coming out of the bomb shelters blinking and smiling as green shoots reach toward a bright sun. Even if the forecast has improved, it’s still gloomy out here.

Fortunately, a lot of smart personal finance bloggers have stepped up to offer some good advice to help get us from here to that sunny day. Here are the best and most useful pieces of advice and most-compelling personal stories from the bloggers, assembled for this, the 223rd edition of the Carnival of Personal Finance.

If you couldn’t tell, the theme is “Financial meltdown, a year later.”

Editors’ choices“I want everybody here to hear my words. We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences and expect that next time, American taxpayers will be there to break their fall.” — President Obama on Sept. 14, 2009

Ohhh, how much we have learned in the last year. But will things really change in the long run? President Obama seems to think so. Will we consumers forget what we learned as soon as the economy turns rosy again? Let’s hope not. I hope this economic crisis will continue to remind us all to not take our jobs for granted, to not spend like there’s no tomorrow and to not live entirely on credit.

Here are some of our favorite posts submitted to this edition of the carnival:

• PT Money explains how you can prevent your television from draining your money and time.
• Get Rich Slowly lists 11 ways you can make building an emergency fund more exciting.
• Carrie on the Cheap lists several common personal finance mistakes (or “fails”) people make and could easily avoid.
• Own the Dollar emphasizes why it is important to know as much about a company as possible before investing with them and lists some ways you can do so.
• Dough Roller offers readers 23 tips and tools that can be used to eliminate debt.
• One Money Design provides tips on how to overcome impulse shopping.

Investing “I’ve been on Wall Street for many years, and I’ve never seen a weekend like this one. We are unwinding what has been years of silliness in the financial markets, and the silliness is being vaporized as we speak, unfortunately with the stock price of a number of companies involved in it.” — Michael Holland, chairman and founder of the New York-based investment firm Holland & Co., on Sept. 15, 2008One year and one train wreck later, the American economy is doing much better, but we are all still a little wary. Can we really trust those guys in black suits? Is it really safe to invest? Will I lose everything? These posts below offer insight into investing — even in hard times.

• Amateur Asset Allocator explains how to maximize your chances of reaching your financial goals even if the market decides not to cooperate.
• Saving to Invest lists five stocks he thinks Warren Buffet would be buying in this economy.
• Darwin’s Finance explains what covered call writing is and offers several advantages of utilizing this strategy.
• Dividends Value explores the thought that you should have conviction behind your investing strategies and explains why investing in dividends is his conviction.
• Narrow Bridge Adventures gives a primer on what margin trading is and how it works.
• Investing Toolkit explains the ins and outs of asset allocation.
• Affine Financial Services offers information about how to invest in several emerging global markets, and addresses whether you should do so.
• M is for Money just opened up a Roth IRA with Vanguard and explains how you can, too.

Frugality and saving“If money isn’t loosened up, this sucker could go down.” — President George W. Bush on the bailout package on Sept. 25, 2008This economy has been devastating for millions of Americans and has forced many of us to tighten our belts. Some of us have lost jobs and even lost homes. Many people who were previously doing just fine found themselves cutting corners and paying bills late. Being frugal actually became hip, with new lingo such as “frugalista” surfacing. These posts offer tips and advice on cutting costs, even when you think you have already trimmed all the fat. 

• Fine-Tuned Finances gives tips on how to avoid spending a fortune on automobile repairs.
• My Life ROI lists seven ways you can cut down on the costs of a college education.
• Foreigner’s Finance has several additional tips on how to save money during school.
• Provident Planning helps readers determine how much money you should save for your emergency fund.
• Beyond Paycheck to Paycheck explains how if you play it right, you can have a fun-filled weekend of going out without spending much.
• Free Money Finance offers tips on how you can save money on your heating and cooling costs.
• Budget Pulse contests the idea that using canvas grocery bags will save you money.
• Len Penzo explains why, contrary to popular belief, rechargeable batteries are usually not cost-effective.
• Mighty Bargain Hunter provides a list of ways you can save money on your car insurance.
• Pay Less for Food explains how you can save money on food by creating a more effective grocery shopping list.

Debt and credit “…[T]he economy is weaker than it appears. Using GDP growth and unemployment, the U.S. economy is healthy. But the level of debt (both consumer and government), the real estate ‘boom’ that seems based on leverage and loose credit … and the poor employment situation (especially the low level of participation) indicate an unhealthy economy. I believe this recovery is being built on a marshland of debt.” — Financial blogger Calculated Risk on Feb. 20, 2005Debt and credit: the two key terms of the collapse. Too much of our economy was founded on wealth that didn’t exist. While it was painful when the bottom fell out, the silver lining is that many of us are more cautious about spending way more than we have. Let’s just hope that the government can follow suit. Read on to learn more about how to use credit wisely.

• Clear Choice Credit Cards outlines the benefits and disadvantages of using prepaid credit cards.
• Money Smart Life provides tips for how you can improve your credit score.
• Financial Highway lists 11 dumb ways to get into debt.
• Personal Finance by the Book explains what a security freeze is (also known as a credit freeze) and how it works.
• Studenomics discusses the problem with irresponsible credit card representatives targeting students on college campuses.

Money management “… [I]n this most volatile and dangerous macroeconomic, financial, and geopolitical situation, the risk of a U.S. recession turning into a systematic financial meltdown cannot be ruled out.”– Economist Nouriel Roubini on Aug. 7, 2006Roubini, once labeled “Dr. Doom” for his lonely pre-recession pessimism, was right. Too many shaky elements led to one nasty collapse. If you don’t watch your finances closely, you may find yourself in the same place. Maybe you can pay all your bills, but the minute you lose your job, you don’t have any savings to keep you going. Maybe you contribute to your 401(k), but you can’t pay your credit card’s minimum payment. It takes time to find the right balance, and the posts below will help you gain additional money management skills.

• My Dollar Plan lists five ways you can access cash when you’re low on funds.
• Money Under 30 helps readers understand what portion of their income they should spend on their mortgage payments.
• Money Mythos reminds prospective homeowners of all of the costs associated with purchasing and maintaining a home.
• Well-Heeled With a Mission discusses a conundrum faced by my parents in this economy: Should they save up and pay for their children’s college education, or focus on their own needs and retirement?
• Family Balance Sheet provides a financial checklist you should use when you turn 40.
• Good Financial Cents explains four things you can do, each in just 15 minutes, to improve your finances.
• Banker, Saver offers tips for how you can avoid paying nasty bank overdraft fees.

Economy “… [C]apitalism without financial failure is not capitalism at all, but a kind of socialism for the rich.” – James Grant, of Grant’s Interest Rate Observer (in reference to the subprime crisis) on Aug. 26, 2007The economic crisis has been tragic, but it seems to have left most people with a different perspective about money. Maybe we shouldn’t be living in such excess. Maybe our investments shouldn’t be so based on speculation. Maybe we shouldn’t buy a house that has a mortgage we can barely afford. Read on to learn about some of the other lessons learned from the recession, in addition to information about how the health care reform may affect us.

• Gather Little by Little shows how the collapse of the Lehman Brothers has taught us many lessons about finances.
• Budgets are $exy covers the five lessons the economic recession has taught him.
• My Wealth Builder also chimes in with things learned from the financial crisis.
• Modern Gal contributes additional thoughts on the financial lessons we have learned a year after the economy really went down the toilet.
• Don’t Mess With Taxes takes a look at Senate Finance Chairman Max Baucus’ health care reform proposals and explains how they might affect individuals.
• GRACEful Retirement discusses how its easy to spot a Nigerian scam, but why so many (including his friends) fell victim to Bernie Maidoff.

Other Even several years before the crisis, many economists were warning of impending doom. These loners were ignored, and we all know what happened next. There were several great entries that did not fit into the other categories, but rather than ignoring them, we happily feature them below.

• Bret Frolich explains why there is nothing wrong with aiming high when it comes to your income.
• The Financial Blogger discusses the pros and cons of getting an MBA, which he learned along the way.
• Stumble Forward warns readers of a PayPal phishing scam, which if you fall for, could severely compromise your finances.
• Money Help for Christians investigates if there are any cheaper alternatives to PayPal.

Thanks to all who contributed to this week’s Carnival of Personal Finance.

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Tags: Year Year Later