Some Thoughts on Conspicuous Consumption – and Less Expensive Ways to Show Your Status

A few days ago, I commented on a friend’s wristwatch. I happened to notice it because the face of the watch was black, which actually stood out on his wrist.

It turned out that this watch was a Rolex Submariner, something that often sells in the five figures. He was quite proud of it.

I mentioned to him that I had noticed he usually wore two other watches, one with a blue face and one with a white face, and he laughed. “I actually have about 10 watches that I rotate, mostly with white faces.”

Were they all similarly expensive? It turned out that this Submariner watch was actually in the middle of the road compared to the rest in his collection. His most expensive watch was a Patek Philippe, which was pretty high into the five figures.

Why? I couldn’t help but ask him that. He told me that he honestly didn’t know, aside from the fact that they looked good on his wrist. “I suppose that people who like nice watches will appreciate it.”

(At the end of this conversation, my friend, with a laugh, said, “You’re probably going to want to write about this on The Simple Dollar, aren’t you?” I nodded and he told me to go for it, because even he recognized that a six-figure watch collection was perhaps not the smartest financial choice.)

I completely understand where my friend is coming from. The watch he wears on his wrist is aesthetically pleasing. It stands out a little, enough that I even noticed it, and I’m usually oblivious to such things. My guess is that the watch makes him feel very good about his appearance and that boosts his personal confidence, although we didn’t directly dig into that issue.

But why do those things happen? In the end, what real advantage does a five-figure watch have over a three-figure watch (or even a two-figure one)?

Other than some extremely minor aesthetics, the biggest advantage that the expensive watch has is that it gives an appearance of wealth. For those that notice it and realize what it is, it’s an indication that this person has the resources to pay five figures for a watch.

In other words, it’s conspicuous consumption. From the Wikipedia definition:

Conspicuous consumption is the spending of money on and the acquiring of luxury goods and services to publicly display economic power — of the income or of the accumulated wealth of the buyer. To the conspicuous consumer, such a public display of discretionary economic power is a means either of attaining or of maintaining a given social status.

The purpose behind wearing such a watch isn’t the functionality of the watch. The functionality can be obtained at a much lower price. It’s about attaining or maintaining social status through a public display of spending power. It is a public display that says that the person wearing this watch is valued or valuable enough to be able to afford a five figure item on his or her wrist.

It’s similar to the reason that people wear expensive clothing or expensive jewelry. On a lesser scale, it’s why people tend to use high end electronics. None of those things provide any sort of meaningful functionality that surpasses less expensive versions (in fact, I’d argue that they’re less functional because there’s a financial reason to be much more protective of a five figure watch).

It’s not about what the item actually does in terms of functionality. It’s about status. It’s about appearance. It’s about self-confidence, in other words.

In other words, would you pay five figures for an item that made you feel substantially more self-confident in any situation? There are a lot of people who would do this… in fact, there are quite a few people who do this.

There’s a problem with that tradeoff, though.

For starters, such items often don’t lead to sustained improvements in self-confidence. They might help with your self-confidence over the short term, but something else will need to sustain it long term. Because of that, many people who buy items to improve their self-confidence often end up buying a string of them over time. When the self-confidence boost from a watch fades away, you’re either left accepting a reduced sense of self-confidence or you buy another item to artificially boost it again. (I should know; I have been caught in this cycle myself in the past.)

Of course, there is a third option.

The most powerful type of self-confidence booster isn’t conspicuous consumption. It’s self-improvement. It’s about genuinely improving aspects of yourself that bother you so that they no longer detract from your self-image.

There are many, many ways to improve your self-image and thus your self-confidence without conspicuous consumption.

You can try hard to always do the right thing and build a positive reputation. Few things feel better than knowing that you’ve done the right thing in a lot of situations in life. Doing so can build a strong sense within that you are a good and worthwhile person, plus it can help build a positive reputation for you which makes self-confidence much easier.

You can improve your grooming habits. Simply adopt a more thorough personal hygiene and grooming routine at the start of your day.

You can nip negative thoughts in the bud. Whenever you notice yourself thinking negative thoughts about yourself or about others, consciously shut down those thoughts and consciously look for positives. You’ll find that the whole world begins to look better.

You can lose weight. Not only does this provide health benefits, it can provide a powerful boost to self-confidence.

You can consciously work on your social and networking skills. Being able to put aside personal nervousness and actually talk to people in a social setting can completely change one’s worldview and one’s self-image.

You can engage in an interesting hobby. This often gives a person something to talk about and to share with others. It gives you a starting point for conversation, if nothing else. I can’t tell you the number of great conversations I’ve had about hiking or even about tabletop gaming.

You can actively practice self-appreciation. Simply list three things you appreciate about yourself every single day.

You can accept imperfections. No one is perfect – not you and not anyone else. That’s okay. Accepting that can do wonders for a person’s self-confidence once they realize that they don’t have to be perfect.

All of those steps add up to one key thing: self-confidence. In the end, that’s the real purpose of conspicuous consumption: it’s a substitution for self-confidence in order to gain the respect and admiration of others. A status symbol isn’t true status – it’s merely a substitute for it. True status comes from the person behind the status symbols, and if you have self-confidence and good character traits, you have everything you need.

At that point, status symbols become nothing more than overpriced trinkets; their value for increasing self-confidence basically vanishes because you already have that confidence. Their value for displaying status basically disappears because you already have that status.

The best investment you can make in your future isn’t to buy a status symbol. The best investment you can make in your future is to improve yourself. That turns out to usually be an investment of time rather than money.

Instead of buying that status symbol, use that money elsewhere to eliminate debts, build an emergency fund, and begin paving the life you want to live.

If you already have all of that, sure, buy yourself a five figure watch if you want one, but at that point, you can see it for what it is: a very expensive trinket on your wrist. It’s not self-confidence. It’s not status. It’s just a watch.

Self-confidence comes from within. Status comes from sustained self-confidence and other positive character traits. You can’t buy those things permanently; a status symbol is just a temporary boost at an extremely stiff price.

Good luck.

Related Articles:

• Why Emulating the Affluent Is a Terrible Way to Make Spending Choices
• The Illusion of ‘Winners’ and ‘Losers’ When Buying Stuff
• How to Get Rich: 10 Ways Wealth Is Created

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How to Qualify for a Small Business Loan

Applying for a loan under any circumstances is rarely fun. With all the paperwork and loan requirements, it probably ranks somewhere between visiting the dentist and filing your taxes.

For small business owners in need of cash to keep the doors open and the lights on, the process of qualifying for a loan can be even more nerve wracking. But there are ways to make obtaining funding for your business a little less painful, and to perhaps increase your odds of success as well, according to small business experts.

“The most important piece of advice is to apply for a loan before you need it,” says Lou Leyes, a business coach and financial planner with Susquehanna SCORE, which provides free and confidential business mentoring. “People often wait until the last minute to get a loan, and that’s the worst time to do it. Do it as soon as possible.”

While it may sound somewhat counterintuitive to ask for money before you actually need it, doing so will make the process much less stressful – and can improve your odds of meeting all the small business loan requirements.

That’s just one of the many pieces of advice Leyes and other financial advisors have to offer. Here’s a look at some of the other tips they say will make the process a little bit less fraught with stress and pitfalls.

1. Familiarize yourself with ‘The Five Cs.’

This is perhaps the most basic first step in applying for a small business loan. The five Cs are essentially what the bank is looking at when reviewing any loan request — what it considers the most critical small business loan requirements.

More specifically, the five Cs are: character, credit score, capacity, capital, and collateral.

When it comes to credit score, for instance, lenders have a certain threshold they’re not willing to go below. And they will view your business credit score (your personal credit score is often taken into consideration, too) as a measure of your willingness and commitment to meet financial obligations.

Capacity, meanwhile, refers to a company’s monthly or annual revenues, and capital pertains to cash-on-hand. The bottom line is, you should familiarize yourself with all the criteria banks will use to evaluate your application, and do what you can to put your best foot forward in each category.

“It’s important for a borrower to understand how they size up, where any weaknesses are, and if there’s anything that needs to be taken care of, corrected, or fixed before speaking with a lender,” says Robert Mineo, financing assistance program director for the Small Business Development Center at Lehigh University’s College of Business & Economics.

2. Develop a solid business plan.

Your business plan is like your road map, but with even more detail. It’s a formal document that lays out your business goals, why they’re attainable, and you plans for reaching those goals. Banks will want to see this document as part of the lending application. So make sure you’ve got a solid, professional, well thought-out plan to present.

“If you’re a brand-new business owner with a solid business plan, lenders will often lend money based on that business plan,” says Leyes.

3. Obtain guidance from a Small Business Development Center.

A service of the U.S. Small Business Administration, there are Small Business Development Centers (SBDCs) located throughout the United States. The mission of these centers is to help entrepreneurs realize the dream of business ownership and to help existing small businesses remain competitive.

For no cost, SBDCs will help small business owners with such things as identifying the right type of funding for a project, explaining the best strategies for navigating the financing process, and presenting a solid loan proposal, says Mineo.

4. Approach your meeting with a potential lender as if it’s a job interview or a first date.

What does this mean exactly? Once again, it boils down to putting your best foot forward.

When you apply for a business loan, wear what you would to a job interview, says Leyes. You want to appear professional.

To this, Mineo adds the dating analogy. “The goal is to see if both parties are interested. If the project — whether it’s a start-up or expansion — appears to be a good fit, the lender will provide information on next steps and what they require for the final application,” Mineo explains. “The borrower should then organize information and complete the required documentation.”

5. Be prepared to provide collateral.

As mentioned earlier, collateral is a key issue. Depending on the size of the loan, your credit history, and other variables, a lender may seek some collateral to back your loan — meaning an asset they can repossess if you default on the loan. (Auto loans and mortgages are two common examples of loans secured by collateral — namely, your car and your home.)

As for what kind of collateral people should have exactly – there’s not really a great answer for that question, according to Mineo. It all depends on the lender, the type of financing being sought, and other factors. But in general, collateral is typically a valuable asset such as a home, a car, or commercial property.

More importantly, know this fact: “It’s extremely difficult to obtain financing without any personal or business assets available,” Mineo says.

A Few Final Bits of Advice

If you’re considering opening a business, begin saving money immediately, socking away as much as you can. Not only will the cash help extend your start-up runway or come in handy during an emergency — it will also improve your chances of obtaining a loan when the time comes, says Leyes.

“Start improving your personal cash flow right away, and cut every expense you can in your personal life, so that you’re sitting on a ton of cash,” advises Leyes.

Also consider applying for a loan from local banks first to increase your odds of success, Leyes adds. “I work with the local banks in my area, and the relationships are easier to develop and maintain,” he explains. “And those relationships will take you a long way when things aren’t going well.”

Finally, don’t be discouraged by rejection. Rather, use the experience as an opportunity to find out what exactly the lender found objectionable, so that you can fix the problem and make your application stronger next time around.

“Ask questions as to why you’re getting rejected, understand what their criteria was and why they didn’t think the loan was a good risk for them,” concludes Leyes.

Related Articles

• Best Small Business Loans for 2016
• Small Business Grants for Women
• How to Build Business Credit

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31 Days to Financial Independence (Day 4): Figuring Out Your True Hourly Wage – and What It Means

“31 Days to Financial Independence” is an ongoing series that appears every Thursday on The Simple Dollar. You might want to start this series from the beginning!

The first three entries in this series started off in something of an unexpected place for people looking for solutions to their financial problems. Rather than digging right into the dollars and cents of the situation, we started off this journey by “zooming out” a little bit and looking at our lives as a whole. What do we want to do with our life? Why do we feel as though we’re spread so thin? What can we do about that?

The truth of the matter is that it’s very difficult to make any lasting change in your financial life if you’re spread too thin in the other areas of your life. Thus, the first step is to simply fix that state.

From there, now we can move onto the next steps, the foundational pieces of getting your financial life in order on top of a firm foundation.

It starts with your true hourly wage.

* * *

So, what exactly is a “true” hourly wage? Most of us know what our hourly wage is for the work that we do, but what isn’t “true” about it?

While your hourly wage is how much you are paid for each hour you work, your true hourly wage is how much money you keep for each hour you devote to your work. That turns out to be a drastically different thing.

I first learned about this concept from the wonderful personal finance book Your Money or Your Life by Joe Dominguez and Vicki Robin, but over the years I’ve seen this idea pop up in my life in countless different ways.

The easiest way to demonstrate a “true” hourly wage is by example, so let’s dig into one.

Our friend John works 40 hours per week for 50 weeks a year. For that, he earns a salary of $40,000. So, if we do the math here, we’ll see that John works 2,000 hours per year (40 hours/week times 50 weeks/year), and thus earns $20 per hour at work ($40,000/year divided by 2,000 hours/year). That’s straightforward enough.

However, that doesn’t include the many other hours that John devotes to his job.

He has a half an hour commute to work and another half an hour commute from work, which adds five hours per week or 250 hours per year.

Once or twice a week, he spends two hours in the evening doing work-related tasks, which adds three hours per week or 150 hours per year.

Twice a year, he has to work an extra full day on a weekend, which adds 16 hours per year.

It’s basically mandated that he goes out to lunch with coworkers at least three times a week, which eats another hour out of his day, which adds three more hours per week or 150 hours per year.

We could add more things, but let’s just stop there. The truth is that instead of just working 2,000 hours per year, John actually devotes 2,566 hours per year to his job.

Now, what about that income? He makes $40,000 a year, right?

Well, he loses $4,000 of that immediately to federal income taxes and another $1,000 to state income taxes.

He spends $10 more on lunch three times a week than he otherwise would, which adds up to $1,500 per year ($10 times 3 lunches per week times 50 weeks per year).

He spends about $0.50 per mile during his commute for fuel, maintenance, registration, insurance, and depreciation. His commute is 15 miles each way, so he drives 30 miles a day for his commute, which means it costs him $15 per day. Multiply that by 5 days per week and 50 weeks per year and you wind up with $3,750 in annual expense.

He has to maintain a decent work wardrobe, which adds up to $250 a year.

Again, we could add more things to this scenario, but you get the idea. These extra job-related expenses are taking money out of his pocket – $10,500, to be exact.

Suddenly, rather than making $40,000 from working 2,000 hours, he’s actually making $29,500 from devoting 2,566 hours to his job.

His hourly wage on paper might be $20/hour, but his true hourly wage is $11.50/hour.

That’s painful to think about, and most people don’t want to think about it that way. The truth is that John is repeatedly trading away an hour of his life – his time, his energy, his focus – for $11.50. He does it over and over and over and over again.

(The truth is that the exchange rate is probably worse than that – we didn’t include nearly all of the factors that add “work time” nor did we include all of the factors that reduce the money that you actually keep.)

Knowing your true hourly wage is important for a bunch of reasons, but two really stand out.

First of all, it gives you a strong baseline as to whether something is worth your time. If John can spend an hour doing something that will save him $20, then it’s worth it to him. It’s far better than the true hourly rate he gets from the time devoted to his job. If he went just by his stated hourly wage, then such a task might not seem as good, but $20 an hour in his pocket is way better than the $11.50 an hour in his pocket that his real job gives him.

What I’ve found over the years is that knowing my true hourly wage really makes frugal tasks look quite good in terms of dollars and cents. There are tasks that, at first glance, I wouldn’t imagine would be worth the time, but when I actually thought about them and then considered my true hourly wage in comparison, they actually seemed pretty good.

Second, your true hourly wage lets you see how many hours of your life you’re exchanging for various goods. If John buys a $1,000 television, he previously thought that was just a little more than a week’s wages – $20 an hour times 50 hours equals $1,000. Not bad. However, the truth is that he’s only getting $11.50 per hour of his time and energy, which means he’s trading 87 hours of his life away for that television.

Those kinds of comparisons are even worse for small things. If your “true” hourly wage is just $8, for example, buying a $2 slice of pizza and a $2 beverage means you’re literally trading away half an hour of your life for that stuff.

For me, at least, those kinds of comparisons are downright agonizing. I do not want to be in the business of trading away chunks of my life for small, forgettable things. If I’m going to work for a large number of hours to be able to pocket the money to pay for something, I want that purchase to be a meaningful one. I don’t want to trade my life away for an endless string of forgotten little “treats” and relatively meaningless splurges.

Let’s step back now and take a look at your true hourly wage.

Exercise 4 – Calculating Your “True” Hourly Wage and Putting It to Work

To begin with, figure out how much money you made in the past year. You can do this by looking at last year’s tax returns or paychecks. You’ll also need to estimate, to the best of your ability, how many hours you worked last year. Don’t worry about adding in extra work – just focus on the hours spent in the office working on tasks.

Got that? Now, if you take that annual income and divide it by the number of hours worked, you have your approximate hourly wage… but that’s not your true hourly wage.

To get your true hourly wage, you’re going to have to walk through your life a little bit in order to figure out where you’ve spent extra time and spent money on things directly related to your job. The time you spent increases the hours you’ve devoted to work, while the money spent decreases the actual amount that makes it into your pocket.

I’m going to break these things down into a few categories. I suggest taking out a piece of paper and tabulating all of the time and money spent on these things throughout the year.

First of all, how much did you pay in state and federal income taxes? That’s money taken straight out of your pocket, so you need to include it.

Next, let’s look at the general area of commuting, something that most employees have to do.

How much time do you spend commuting each day? This includes things like walking or riding a bike or even riding mass transit.

How many miles do you drive? Once you know the daily mileage to and from work, you’ll want to multiply that by $0.58, which is the AAA estimate of the per-mile cost of operating a vehicle (gas, maintenance, oil, insurance, registration, depreciation, and so on).

How much do you pay for tollways?

How much do you pay for parking each day (or each month or year, depending on how you pay for it)?

If you have to use mass transit to get to and from work, what’s the daily cost for that?

Multiply those things by the number of workdays in a week, then the number of weeks that you work in a year. You’ll quickly see how much those factors add up.

What about taking work home or weekend work? Make sure you’re including that when you include your total number of work hours.

What about work clothes? You should include the cost things like makeup and briefcases and extra grooming and other such items here, as well as the time spent shopping for them and the time spent actually using them.

What about meals? How often do you go out to lunch or dinner with coworkers or with professional guests? What about entertaining for work, like hosting dinner parties? How often does your job force you to eat convenience foods, and what do they cost (think of a vending machine or a fast food stop)?

What about hired help? If you have to have child care in order to be able to work, then you absolutely need to include that expense. Maybe you also hire people to help with other household tasks like cleaning or laundry.

What about decompression and entertainment? How much “down time” do you need to unwind when you get home? What do you spend on entertainment during that “down time”? Do you use entertainment or other things to “escape” from your everyday life – and if you do, how much does that stuff cost and how much time does it eat up?

What about extra lifestyle expenses – things that you buy because you think you should because of your salary or status? Do you go on excessively expensive vacations because you can “afford” it or need to “escape”? Do you have to use a gym to keep in shape because your job is sedentary (I’d probably count the cost here, but I’ll leave the time involved at your discretion)? What about owning a “summer house” that you “escape” to every once in a while – what does that cost? Think about the extra lifestyle expenses you have in your life that are far beyond what you’d need to do for basic enjoyment.

What about other work expenses? Do you buy any books related to your career? Do you subscribe to any magazines or trade journals? How much time do you spend with these things because you think it’ll help your career (don’t count the time if it’s truly personal enrichment)?

As you can see, these expenses – both in terms of time and in terms of money – really add up. I strongly encourage you to go through each of these questions and think about whether those time and money expenses really exist in your life and, if they do, how much they add up to over the course of a year. If it’s a daily expense, multiply it by 5 (days per week) and then by 50 (weeks per year). If it’s a weekly expense, just multiply it by 50 (weeks per year).

Then, when you’ve calculated all of those numbers, add up the annual hours and annual expenses. Add the annual hours to the initial number that you estimated – the amount of hours actually spent at work – and then subtract the annual expenses from your annual income.

Then divide the two – take your adjusted annual income and divide it by your adjusted hours devoted to work.

That’s your true hourly wage. And it’s probably painful.

Most people don’t realize how little they’re willing to exchange an hour of their life for, yet over and over again you’re making that trade. You’re trading an hour of your life for that true hourly wage and you’re likely doing it 60-70 times a week (or even more).

That alone can be enough to make you strongly think about your career choices. Driving across town to make $10.50 an hour might be a worse move than working for $8 an hour at the gas station across the street, for example. It’s very possible that the gas station job across the street will leave more money in your pocket for each hour you work – in fact, I’d say it’s quite likely.

However, you might find an even bigger impact when using that true hourly wage to evaluate your purchases. This one can be a real life changer.

If you previously didn’t think about your true hourly wage at all, you might just see a $1,000 television as being a very expensive item, but one you’ll enjoy a lot. It’s bigger than that $500 television and would look great in your living room.

What if your true hourly wage is just $8 an hour, though?

That $1,000 television means you are devoting 125 hours of your life just to put that television in your living room. That doesn’t include the hours you’ll spend each month just to afford the programming on it – if you have a $100 cable bill, for instance, that’s 12.5 hours of your life gone just to have that cable package. Over the course of just one year, that’s 275 hours of your life that vanishes just to have this television.

On the other hand, maybe you stick with just that $500 television and, instead of cable, you just subscribe to Netflix for $9 a month. The television now costs you only 62.5 hours of your life, while Netflix is costing you only 1.125 hours of your life each month. This option is only costing you 76 hours of your life for a year of television.

The Big Follow-Up Question

The obvious question that people have from these calculations is what happens to the hours that I “save” by making better spending choices? In the example above, buying that less expensive television “saves” 200 hours out of my life this year, but in reality, we don’t directly see those hours. We don’t suddenly have 4 more hours of free time in a week if we make that choice.

So how does that pay off? It pays off in several ways that you don’t expect, actually.

First of all, it pays off in the form of reduced stress. Take that savings and put it aside for an emergency, like a car breakdown or a sudden job loss. Suddenly, you feel more secure about your day to day life – a little bit of the stress of walking the high wire is gone.

It pays off in the form of lower debts, which is the very first inkling you’ll get of the power of money over time. If you instead apply the hours you would have spent to get that big television and cable bill and instead apply them to paying down your debts, you’ll see that your debt payment gets smaller and the amount of interest you owe each month goes down, too. Your bills start to shrink, meaning you can devote fewer of your hours each month just to earning the money needed to keep afloat and you can spend more of your hours each month earning money for building the life you actually want.

In fact, that’s exactly how I like to look at my time spent working. I have to spend a certain amount of work time each week doing things to simply pay the bills and keep things going – my life expenses, in other words. The rest of my work time is spent earning the money I need to build the life I want. I want to spend less of my work time on merely paying the bills and covering basic life expenses and more time building the meaningful life I want – and I’m guessing you feel the exact same way. The easiest way to do that is to be conscious of what my purchases are actually costing me in terms of my working time.

Next time, we’re going to tie this “true hourly wage” concept directly to the life changes we talked about in the first few days of this journey. What are you really working for? We’re about to figure that out, and it will provide you with a rocket ship full of meaning and motivation for getting your financial life straight.

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Three Reasons You Shouldn’t Pick Your Career Off a ‘Hot Jobs’ List

Media outlets love to issue “hot jobs” lists (we’re as guilty as anyone), telling you which careers to target based on considerations like occupational outlook and earning power. But while expected salary and job opportunities are perfectly valid factors to include in your decision, they’re far from the only reasons to pick a career path.

Here are three reasons why you should take such rankings with a grain of salt.

1. Today’s hot job is tomorrow’s law degree.

Years ago, career counselors (and well-meaning relatives) advised humanities majors to take their LSATs before graduating with their bachelor’s degree — “just in case.”

“After all,” the conversation generally went, “You can do anything with a law degree.”

Then, due to a variety of factors (the recession, for example, and websites like LegalZoom that offer basic legal services on the cheap), the bottom dropped out and law blogs started running pieces like “The 20 Law Schools With The Most Unemployed Graduates.”

The point is, you have no way of knowing whether today’s promising occupation will still be in demand tomorrow. If you choose a field based on your interests, aptitudes, and passions, you’ll at least be willing to fight for it when tough times hit.

Pick something off a list, and you may be stuck chasing a career that was never really going to lead to your dream job.

2. Fit is everything when it comes to careers.

“When looking for a job, you want to take into consideration your own unique personality, values, interests, and skills,” says Penny Loretto, associate director of the Career Development Center at Skidmore College.

“’Hot jobs’ that are continually advertised all over the media may be good for some individuals as long as it’s a career that matches your own personal attributes and expectations,” Loretto says. “Selecting a job based on current trends or salary alone could be a big mistake, since it’s just a list of jobs or career fields and doesn’t take personal attributes into consideration.”

If you long to write the Great American Novel, and can’t concentrate in math and science classes, you’re probably never going to be a success as a software engineer, no matter how hot a career it is. And if you can’t stand the sight of blood, you’ll never be happy as a registered nurse. There’s no point trying to shoehorn yourself into a job that will always be a bad fit.

As a career counselor once told me during my own years of carving out a career path, “Trying to make yourself happy in the wrong job is like trying to write with your non-dominant hand. You might learn to do it passably, but it will take longer and never feel natural.”

3. ‘Picking’ a career is a process, not a one-time choice.

Another popular trope of the career advice world is the old, “You’ll have X different careers in your lifetime.” It might interest you to know that no one really keeps tally of that.

It’s true: the Bureau of Labor Statistics, which is where most people would look for such data, doesn’t track that information, in part probably because figuring out where one career ends and another begins is increasingly hard.

Unless you go back to school and retrain for something drastically different than what you have been doing, your career will likely evolve gradually as you figure out your strengths, weaknesses, and interests. That’s all to the good, since there’s no real way to know how you’ll fit into a career until you’re in the middle of it.

Regardless of where you start out or hope to end up, the rules of building a successful career are the same:

• Listen to your heart, but don’t confuse fear with disinterest. Sometimes, you need to take a class that’s a stretch or volunteer for a project that will require you to try something new. That’s not the same as doing a job that feels like writing with your non-dominant hand.
• Do whatever you can to build your network, including doing internships and being socially active in your field.
• Look for ways to build your practical skills while you follow your dreams. That might mean taking STEM classes to balance out your humanities courses or finding ways to get a valuable certification before graduation, to set yourself apart from the field of prospective hires. Being pragmatic doesn’t mean walking away from what you love; it just means taking deliberate steps to get yourself where you want to go.

Related Articles:

• The Myths and Realities of ‘Doing What You Love’
• Why Taking a Pay Cut Was the Best Career Move I Ever Made
• You Already Have All The Skills You Need to Succeed
• Earn and Learn: 10 Great Jobs That Start With an Apprenticeship

The post Three Reasons You Shouldn’t Pick Your Career Off a ‘Hot Jobs’ List appeared first on The Simple Dollar.

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Frugality and Long-Term Financial Success

Like many people who suddenly realize how bad their financial situation is, we dove hard into frugality during the first few months of our financial turnaround.

It makes sense, really. Frugality is the best personal finance tactic there is for seeing immediate results. If you choose not to spend – or you choose to spend less – you see the results from that choice immediately in your wallet. There’s simply more cash sitting there.

Sure, there are many, many approaches to personal finance that offer great results. Getting a part time job is one. Going back to school to get a better degree is another one. Starting a microbusiness is another one. Investing is, of course, another one. However, all of those tactics take time to work – you’re not going to get really fast results with any of those moves. Frugality is fast, and that’s why people so often turn to it when their finances are struggling.

What about the long term, though?

Many people view frugality as a less effective strategy over the long term. Their argument is simple. There’s only so much money you can save with frugality – once you’ve optimized many avenues of your life, you start to reach a point where there’s not much more you can squeeze out. Not only that, once you reach that point, further frugal changes tend to really cut into the joy of life. At the same time, other strategies, such as improving your income and investing sensibly, really start to take off like a rocket ship over longer periods (a few years and beyond).

I don’t quite see it that way.

In my eyes, investing and increasing income is like a financial rocket ship that will take you anywhere you want to go. When you improve your income or when you have investments that are building in value, your net worth can feel like a powerful rocket, pushing off of the launching pad with incredible force and pushing up and up and up, faster and faster and faster.

However, every rocket ship needs rocket fuel, and that’s what frugality is. Frugality is the fuel that the rocket needs to ignite and launch. Frugality is the fuel that keeps burning and sends that rocket going higher and higher and higher.

Without fuel, the rocket can’t fly. Without the rocket, the fuel doesn’t go anywhere. You need them both for success.

What does that mean in terms of practical use, though?

First of all, frugality provides the money that you need to start investing. The vast majority of Americans live paycheck to paycheck and thus don’t have the money in their day-to-day lives to contribute to their investments or to their 401(k) or to their Roth IRA. Frugality can help with that. If you can use frugal strategies to cut, say, $100 a month in your spending, then you suddenly have $100 a month to invest. That’s $1,200 a year to invest. If that investment earns a 7% annual return, you’re going to have tens of thousands of dollars invested within a decade. Frugality provided the initial money to invest, and the power of investing and compound interest caused that money to

Second, frugality helps you to survive on a lower income, such as when you’re getting a degree or transitioning to a new career. Again, without using frugal strategies, it’s very difficult for the average American living paycheck to paycheck to be able to pull off these things. Frugal choices make it possible.

So, undoubtedly, frugality plays a big role in financial turnarounds.

But what about when the financial turnaround is in high gear? Maybe you have a lot in your retirement account, or maybe you’ve just landed a great-paying job after some lean years. Isn’t frugality a strategy that you drop at that point now that you have the resources to live large?

If you think that it is, you’re making another financial mistake.

First of all, most of the best frugal strategies are the ones that have no real negative impact on your day to day life. Your life is not made worse by choosing store brand hand soap. Your life is not made worse by choosing store brand diced tomatoes. Your life is not made worse by driving a fuel efficient car until it reaches the point of needing a stiff repair bill. Your life is not made worse by negotiating with your cable provider for a cheaper bill that lets you keep the few channels you actually watch. Your life is not made worse by canceling a bill for something you don’t use much at all. Your life is not made worse by checking a book you haven’t read before out from the library rather than buying that book.

I can go on and on and on with examples of how making smart little frugal substitutions in your life can have basically no negative impact on your life while keeping money in your pocket. The question is why would you ever abandon those changes? Why would you ever start buying more expensive hand soap when the soap you have now gets your hands clean? Why would you replace a reliable car that shows no signs of needing repairs or replacement? Why would you keep paying a gym bill when you haven’t been there in six months? Those choices are awful choices no matter your income level. You can throw money away on stupid purchases whether you’re making $20,000 or $100,000 a year.

Second, frugality continues to provide fuel for the “rocket ship” of financial success in your life even after it blasts off. Even after your income jumps up, even after your investments start compounding on themselves and growing rapidly, finding a way to save $20 a month and then using that $20 a month to make that investment grow even faster remains a good thing.

Channeling frugal savings into investments means that you’ll get to your destination even faster. It means that you can retire earlier or buy that dream house sooner. That never changes, no matter how much financial success you have.

This brings me back around to one of my key principles of personal finance: it doesn’t matter whether you’re making $10,000 or $100,000 or $1 million a year, spending money on something that provides no life value to you or that you don’t really care about is still a waste of money.

Frugality is about going through those areas of your life that you don’t care about and minimizing your spending in those areas. It’s also about finding better deals for the same thing in the areas of your life that you do care about.

No matter whether you’re making $10,000 or $100,000 or $1 million a year, finding some effortless way to save $10 a month that doesn’t impact your life in a negative fashion is worthwhile. That’s $10 a month that you can invest for retirement. That’s $10 a month that you can put aside for an emergency fund. That’s $10 a month you can use to pay off a debt a little faster.

This brings me to the one sensible argument against some flavors of frugality: the time value of money. Many critics of frugality as a personal finance tool argue that it doesn’t provide enough return on your money for the time you invest, so anyone talking about frugality should be ignored.

Here’s the thing, though: what is your time worth? How much is an hour of spare time worth to you? Is it worth $20? Would you pay $20 for an hour of uninterrupted spare time? What about $40? Different people are going to give different answers here.

So, now that you know the value you put on your time, the question then becomes whether or not a frugal tactic can save you that much money or more if you spend an hour doing it.

There’s also the fact that many frugal tactics repay you in saved time later on. An example: our family makes a lot of meals in advance – if we’re making lasagna, for instance, we usually make four pans at once and freeze three of them. We do this so we can buy ingredients in bulk and really take advantage of sales on things like lasagna noodles. This eats up perhaps 20% or 30% more time during that initial lasagna-making process, but then we have three frozen pans of lasagna in the freezer and we end up saving time whenever we use one of those for supper. It ends up saving us time and saving us money.

The same exact thing is true with making a meal plan and a grocery list – it saves us money by making our grocery store visit a lot more focused, but it takes time to assemble that plan and that list. However, when I’m in the store, I’m actually there for a lot less time than I would be without a list, and that ends up returning that time to me. It usually ends up being a wash in terms of time, but I end up spending a lot less at the grocery store.

The truth is that unless I am making so much money that it’s effective for me to employ a personal chef and/or a personal shopper, it would be really dumb to abandon these frugal strategies. There are many, many, many more strategies like this – ones that save money and cost very little time (or even save time).

Beyond that, many frugal choices are just substitutions for things you do normally where you simply won’t notice the difference between the “cheaper” and the more expensive option. This goes back to my hand soap example – I literally cannot distinguish between store brand hand soap and name brand hand soap, but they certainly have a difference in prices. There are many, many such products where there’s no difference whatsoever that I can tell, so I just buy the store brand. Again, there are many things like this, such as “shopping” for books and movies at the library instead of buying them or paying Redbox or Amazon Instant Video.

All of these different frugal options have no real negative impact on your day to day life, but they certainly have a positive impact on the money in your checking account. It doesn’t matter what you earn each year – you’d be making a mistake just leaving that money on the table.

That’s why, ten years after the start of my financial turnaround, I’m still very frugal. I buy lots of store brand stuff. I visit the library every two weeks and usually leave with a bag full of books and movies. I make a meal plan and grocery list before each grocery store visit. I shop around for better rates on my car insurance at least once a year. These things don’t take much time – some of them actually save time – and they don’t have a negative impact on my life but they do save money. Why would I not do them? Why would I not enjoy ten years’ worth of the money these tactics have saved me?

Frugality can be the fuel you need for your financial turnaround, but it can also continue to be part of the fuel that blasts your financial rocket into the stratosphere. Don’t overlook it.

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Why Retirement Is Out and Financial Independence Is In

“How late it is to begin to live just when we must cease to live. What foolish forgetfulness of mortality to postpone wholesome plans to the fiftieth and sixtieth year, and to intend to begin life at a point to which few have attained!”

-Seneca

In November of 2013 I lost my job.

I was my family’s sole income earner at the time. My wife and I had a one-year-old son and our second was due in a month.

A nightmare scenario, right? Time to update the resume, apply for jobs like crazy, and hope I can find a steady paycheck before we default on the mortgage, right?

Wrong.

Instead of all that, I decided to start my own business. And we decided to move cross-country. And my wife decided to start her own business. And we had our second kid.

And we survived.

It’s been just about three years since that fateful day and we still haven’t figured it all out. But we’re making enough money to support ourselves, we both love the work we’re doing, and we both have the flexibility we wanted to spend time with our kids on our own terms.

My job loss wasn’t a catastrophe. It was an opportunity to build the life we truly wanted. That’s what’s possible when you stop saving for retirement and start striving for financial independence.

Why Retirement Is Old-Fashioned

Let’s get something out of the way right up front: This isn’t one of those #YOLO rants about spending your money today because you might die tomorrow. I’m not encouraging you to be reckless, and I don’t think you should stop saving money.

But retirement is an old-fashioned goal. It assumes that you graduate college, get a job, work for 40+ years, reach 65, quit your job, and finally do all those things you waited your entire life to do.

And maybe that’s exactly what you want to do. But what if it’s not? What if you want to:

• Be home with your kids
• Live in another country for a year
• Start a business
• Volunteer
• Turn Fridays into “date day” with your spouse

Should you really put those things off, or in some cases abandon them completely, in pursuit of some abstract day decades in the future when you get to quit your job?

Is that really the big life goal you want to pursue?

What Is Financial Independence?

Retirement shouldn’t be your big life goal. Financial independence is a much more ambitious and exciting objective.

I define financial independence like this:

The ability to make decisions based on what makes you happy instead of what makes you money.

It’s the point at which money stops being the limiting factor and starts enabling you to live the life you want.

And the great thing about financial independence is that it’s not all or nothing. You can reach it in varying degrees at all different stages of life.

Let’s take a look at what that means.

The Ultimate Goal

The ultimate goal is full financial independence, which is the point at which you have enough money in savings and investments to support yourself for the rest of your life.

It’s similar to the goal of retirement, except that it has nothing to do with age or employment.

You can get there in your 60s. You can get there in your 30s. Or your 40s. Or your 70s. Age is irrelevant.

You can stop working when you get there. Or you could keep working, if you found it fulfilling. Or you could decide to start a business, or a charity, or volunteer to teach at your child’s school, or get really good at drums. Employment is irrelevant.

Just like retirement, it’s important to save ahead for this goal, because at some point you’ll stop earning an income, either by choice or necessity.

The big difference is the scope of what’s possible. When you think about it this way, you have a lot more freedom to be creative about when you reach full financial independence and what you do when you get there.

Finding Freedom Along the Way

While full financial independence is the ultimate goal, it’s not the only goal worth pursuing.

Along the way you can attain partial financial independence, which is simply when you have the financial resources to make lifestyle decisions that make you happy, even when they’re not financially optimal.

My wife and I fell into this second category three years ago. We didn’t have enough money to support ourselves forever, but we did have enough to support ourselves for over a year, even if we earned nothing.

Our partial financial independence allowed us to take an unconventional path in pursuit of the life we wanted, without sacrificing our family’s financial security.

Your partial financial independence might allow you to switch to a single income, leave a job you don’t like, travel, donate your time to causes you support, or whatever it is you’d love to do if only you didn’t need that next paycheck.

When you can separate your survival from your income, even temporarily, that’s financial independence.

What Would You Do Differently?

More than anything, financial independence is a change in mindset.

You don’t need to grit your teeth through a job you hate just so you can eventually quit decades down the line. Instead, you can get creative and use your money to do the things that excite you, both now and in the future.

So tell me, what would you do differently if you knew you’d be okay, even without a paycheck for the next year? What about your life would you want to change? And how can you start making that possible today?

Matt Becker is a fee-only financial planner and the founder of Mom and Dad Money, where he helps new parents take control of their money so they can take care of their families. His free book, The New Family Financial Road Map, guides parents through the all most important financial decisions that come with starting a family.

Related Articles

• 31 Days to Financial Independence (Intro and Day 1): The Shallows and the Deep
• It’s Not ‘Early Retirement,’ It’s ‘Walk Away Money’
• Financial Independence on a Smaller Income
• 10 Steps To Turn Financial Disaster Into Financial Independence

The post Why Retirement Is Out and Financial Independence Is In appeared first on The Simple Dollar.

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Best Credit Cards of 2016

The best credit cards generally offer low interest rates, great perks, and no hidden fees. However, that doesn’t mean the “right” card is the same for each person. Because each credit card offer is as different as we are, the best card for your needs depends on your spending habits, credit score, and personal credit goals. Use this post as your guide to match up your needs with the benefits you desire most.

Apply Now on Chase.com’s secure website

But, if you want to avoid analysis paralysis, here’s the CliffsNotes version: According to our readers, the Chase Sapphire Preferred® Card is the single best credit card with the best rewards and perks for nearly every type of spender.

How do we know? Because, over time, more of our readers have signed up for the Chase Sapphire Preferred® Card than any other rewards card we have seen. Add onto that the myriad feedback we receive on this card’s benefits, such as no foreign transaction fee and the flexibility of Chase’s Ultimate Rewards points, and it’s easy to see why the Chase Sapphire Preferred® Card is one of the top cards on the market.

I can attest to its greatness as well. I have been writing about the credit card landscape for the last three years now, and this is the card I use for the bulk of my family’s everyday spending because I find the Chase Ultimate Rewards platform to be the most flexible for earning and redeeming travel. I even use the Ink Cash® Business Credit Card from Chase for my business as well to combine my business and personal Ultimate Rewards points to take my family of four on a free vacation.

The Simple Dollar’s Top Picks for 2016

The best credit cards on the market come with plenty of perks that include things like cash back rewards, travel insurance, and price protection. They can also help you travel for free, or score heavily discounted travel perks. Other types of cards offer a lower interest rate, which can lead to huge savings over the long term. To help you get started, we created a list of our top cards in each of the main categories:

• Chase Sapphire Preferred® Card
  Best Travel Credit Card
• Chase Freedom®
  Best Cash Back Credit Card
• Discover it® Cashback Match™
  Earn Double Points Your First Year
• Chase Slate®
  Best Balance Transfer Credit Card
• Southwest Airlines Rapid Rewards® Premier Credit Card
  Best Airline Credit Card
• Starwood Preferred Guest® Credit Card from American Express
  Best Hotel Credit Card
• Barclaycard Arrival Plus™ World Elite MasterCard®
  Best Sign-up Bonus for Travel

How Should I Choose the Right Credit Card?

While the Chase Sapphire Preferred® Card is the clear winner for my family, that doesn’t mean it’s the best card for yours. In reality, the best card for your needs depends on your spending style and personal credit goals. Below are a few scenarios to help you narrow down the right card for you.

“I want free travel and perks.”

Travel credit cards are notorious for their amazing perks and travel-related benefits. Not only can you earn points or miles good for free travel, but also many travel credit cards let you earn special status with a hotel or airline, and also let you transfer your points to numerous hotel and airline loyalty programs.

What to look for: If travel is your number one goal, you’ll want a credit card that earns at least 2x points on travel, and has tons of flexibility, including allowing you to transfer points to hotel and airline loyalty programs. Also, many of the best travel credit cards offer additional travel benefits like trip cancellation coverage, primary and secondary auto rental coverage, and emergency travel assistance.

Beware: Most travel cards have annual fees, which are well worth the price if you earn enough points each year to justify the fee. You will also need excellent credit for most top travel cards.

Check out our picks for the top travel cards below.

“I’m looking for the best sign-up bonus right now.”

While it’s smart to think about the ongoing rewards you can earn, scoring a huge sign-up bonus doesn’t hurt, either. Fortunately, a ton of credit cards offer huge bonuses to people who are able to meet a minimum spending requirement within the first few months. While these sign-up bonuses can come in the form of cash back, you can also earn gift cards, airline miles, free hotel stays, and hotel points as well.

What to look for: Credit card sign-up bonuses are often cyclical with a peak season generally in the summer months, although some top travel cards offer healthy bonuses all year round. Sign-up bonuses are highest on rewards cards and travel cards, but make sure the one-time bonus is worth it. Often the largest point bonuses are on hotel cards, which offer little long-term value unless you travel frequently or only stay at one hotel chain. If you only travel one to two times per year, you will probably not earn enough points to justify the annual fee.

Beware: Since most cards with big bonuses come with a minimum spending requirement, you’ll need to make sure you can hit that requirement without hurting your finances. Also make sure the “bonus” you earn is something you can actually use. For example, a sign-up bonus made up of airline miles will only be useful if you plan to travel and can actually fly that airline.

Check out our picks for the top cards with sign-up bonuses below.

“I want to earn cash back on my spending.”

Cash back credit cards let you earn cash back, statement credits, or gift cards for every purchase you make. The best credit cards allow you to accumulate two or more points per dollar or more. Cash back cards are great second credit cards to own and work best when paired with a more general 2x points per purchase rewards card. And since many cash back credit cards are also considered “beginner credit cards,” they offer a great opportunity to build credit while you earn rewards.

What to look for: A cash back card is ideal when used as either your first credit card, or a complement to a higher-earning rewards card. Use cash back cards to maximize rewards on groceries, gas, and other categories where your rewards card might not earn bonus points. I use the Blue Cash Preferred Card® by American Express to earn 6% back on groceries for my family — up to $6,000 per year, for example. You also, generally do not need excellent credit like with a rewards card, but this can vary by issuer.

Beware: Cash back cards often rotate their bonus categories on a quarterly schedule. This means that you might earn 5% back on gas for the first three months of the year, and then groceries in the second quarter. Also, despite the allure of high earnings, cash back cards often cap the points you can earn in a given quarter.

Check out our picks for the top cash back cards below.

“I need to reduce my interest rate.”

One way to avoid high-interest credit card payments is to transfer your balance to a new credit card. When you do this, make sure it’s a credit card that will either accept your balance without charging a fee or offers a 0% introductory APR on balance transfers for over a year. This gives you time to pay off your large balance.

What to look for: If you’re carrying credit card debt at a high interest rate, look for a card with a low interest rate or 0% introductory APR for anywhere between 12 to 21 months. Depending on how much you owe and your current rate, the interest you save could add up quick. And when you’re not paying huge interest payments every month, you may be able to get out of debt faster.

Beware: Most 0% introductory APR cards carry a fee for transferring your balance to the new card. This fee is usually between 3% and 5% of your total balance. The Chase Slate® card waives this fee if the balance is transferred within 60 days from a non-Chase credit card.

Check out our picks for the top balance transfer cards below.

“I need to build credit.”

Building credit is an important step in your financial journey, and using a credit card responsibly is the quickest way to build credit. However, when you do not have credit history, it can be difficult to obtain a card. There are two types of credit cards for building credit: unsecured and secured. Most credit cards are unsecured and do not require a cash deposit to use. A secured credit card is needed in more extreme circumstances where you need to “secure” your line of credit by depositing a cash amount equal to what you want to borrow.

What to look for: If your goal is building credit, rewards should take a back seat for the time being. Instead of looking for the top rewards credit cards, you should home in on cards geared to people with poor or evolving credit. If you can, you’ll want to get an unsecured credit card that doesn’t require a deposit.

Beware: You might have to apply for a secured credit card if your credit score is extremely low or if your credit history is limited. With a secured credit card, you would need to deposit $200-$500 with the credit card company in order to receive a $200-$500 line of credit. This sounds like a big barrier, but with a few months of on-time payments, you can reasonably expect to have the deposit requirement lifted.

Read our reviews for Best Credit Cards for Average Credit, Best Credit Cards for Bad Credit, and Best Student Credit Cards to find one that’s right for you.

“I don’t know what I need.”

If you’re still unsure which type of card would benefit you the most, browsing them all can help you compare and contrast. Take a look at our credit card database below.

Best Travel Credit Cards

Best Flexible Travel Credit Card

Apply Now on Chase's secure website

Chase Sapphire Preferred® Card Highlights

The Chase Sapphire Preferred® Card gets high marks for both its earning structure and its flexibility. With this card, you’ll earn 2x points per dollar spent on travel and dining and 1x points for all other purchases. The points you earn accrue in the Chase Ultimate Rewards program, which is one of the largest and most flexible rewards platforms available.

With this program, you can redeem your points for cash back or gift cards at a rate of one cent per point (50,000 points = $500), use them to book any type of travel through the Chase Ultimate Rewards portal with a 20% discount, or transfer your points to popular loyalty programs like Southwest Airlines, British Airways Executive Club, United MileagePlus Explorer, Marriott, Ritz-Carlton, Hyatt, and IHG Rewards. Read our full review of this card here.

Who Should Get The Chase Sapphire Preferred® Card:

• Frequent travelers who want flexibility in how they use their points
• People who spend a lot on dining and travel
• Anyone who travels with Chase travel partners frequently

How to Use It:

• Pair this card with a co-branded hotel or airline travel card in the Chase portfolio to earn even more points.
• Use your card for all dining and travel purchases to earn 2x points for every dollar you spend.
• Shop through the Chase shopping portal to rack up points even faster.

Best Airline Credit Card

Apply Now on Southwest Airlines' secure website

Southwest Airlines Rapid Rewards® Premier Credit Card Highlights

The best airline credit card depends on a variety of factors including which airports you fly out of, but if Southwest Airlines is an option for you, the Southwest Airlines Rapid Rewards® Premier Credit Card is the best airline credit card for domestic travel and travel to the Caribbean. With this card, you’ll earn 2x points on all Southwest Airline purchases plus 1x points for every other purchase you make. As an added bonus, you can earn even more points by clicking through the Southwest shopping portal before buying anything online or by booking hotels and rental cars with Southwest.

The Southwest Rapid Rewards program comes with no blackout dates, which makes this card an even better option. Since you can book any seat on any flight, you never have to worry about finding award availability on the flight you want. And, your first two checked bags are also free on any Southwest Airlines flight, so you’ll be saving yourself that expense too. Read our full review of this card here.

Who Should Get the Southwest Airlines Rapid Rewards® Premier Credit Card:

• Anyone who can fly with Southwest Airlines
• Someone who wants to travel within the US and to the Caribbean
• People who hate searching for award availability

How to Use It:

• Pair this card with the Chase Sapphire Preferred® Card in order to rack up even more miles.
• Use your card for all Southwest Airlines purchases in order to rack up more points.
• Use the Southwest shopping portal to earn even more points on purchases, hotel stays, and car rentals.

Best Hotel Credit Card

Apply Now on Starwood's secure website

Starwood Preferred Guest® Credit Card from American Express Highlights

While the best hotel credit card for your needs depends largely on where you travel, the Starwood Preferred Guest® Credit Card from American Express gets high marks for hotel and resort options, award availability, and its ongoing perks. With this card, you’ll earn up to 5x points per dollar spent at eligible Starwood properties and 1x points on all other purchases.

The annual fee is waived the first year, and the signup bonus alone can be worth several free nights in one of Starwood’s lower tier properties. If Starwood hotels are available in the areas you’re planning to travel, then this is a win-win. Read our full review of this card here.

Who Should Get the Starwood Preferred Guest® Credit Card from American Express:

• Anyone who wants to earn free hotel stays at Starwood Preferred Guest properties
• Someone who wants a sign-up bonus worth a few free nights
• People who want the option to book properties with points and cash

How to Use It:

• Rack up starpoints, then transfer them to your favorite airline transfer partners.
• Use your card for regular purchases to earn more points over time.
• Use “points and cash” when you book to stretch your points out even further.

Want to compare even more travel credit cards? Check out our in-depth reviews of the Best Travel Credit Cards, Best Hotel Credit Cards, and Best Airline Credit Cards.

Best Sign-up Bonus Right Now

Best Flexible Sign-up Bonus

Apply Now on Chase's secure website

Chase Sapphire Preferred® Card Highlights

We hate to be repetitive, but the Chase Sapphire Preferred® Card really does offer the best flexible sign-up bonus on the market. With this card’s 50,000-point bonus, you can redeem those points for $625 in travel, or transfer them to airline or hotel loyalty programs. For comparison, a hotel card like IHG Rewards might offer an 80,000-point sign-up bonus, but that can only be used at IHG hotels and select partners, which severely limits your options.

Because these points are flexible, your sign-up bonus can look however you want it to look. And since this card’s annual fee is waived the first year, you can try this card out without paying a cent. Read our full review of this card here.

Who Should Get the Chase Sapphire Preferred® Card:

• Someone who wants points redeemable for travel or cash back
• People who want a huge sign-up bonus
• Anyone who is able to spend $4,000 on their card within three months

How to Use It:

• Pair this card with a co-branded hotel or airline travel card in the Chase portfolio to earn even more points.
• Use your card for all dining and travel purchases to earn 2x points for every dollar you spend.
• Shop through the Chase shopping portal to rack up points even faster.

Best Sign-Up Bonus for Travel

Apply Now on Barclaycard's secure website

Barclaycard Arrival Plus™ World Elite MasterCard® Highlights

If you’re interested in a sign-up bonus that is geared specifically for travel, look no further than the Barclaycard Arrival Plus™ World Elite MasterCard®. With this card, you’ll earn a huge bonus with hundreds of dollars in travel. Plus, you’ll earn 2x points for every dollar you spend in any category, all year long.

And since this comes in the form of a “travel credit,” you can use your bonus for any type of travel with no fear of blackout dates or capacity controls. Use your card to book any hotel stay or a flight with any airline, and then redeem your points to cover the purchase. It’s as simple as that. Read our full review of this card here.

Who Should Get the Barclaycard Arrival Plus™ World Elite MasterCard®:

• Someone who wants flexible rewards good for travel
• Someone who dislikes searching for award availability
• A person who isn’t loyal to a specific airline or hotel chain

How to Use It:

• Use your card for all of your everyday purchases to earn 2x points for every dollar you spend.
• Earn the huge sign-up bonus and then book any travel experience of your choosing.
• Try this card’s benefits for “free” the first year since the annual fee is waived.

Want to compare even more credit cards with sign-up bonuses? Check out our in-depth review of Best Credit Card Sign-up Bonus Offers.

Best Cash Back Credit Cards

Best Cash Back Card with Rotating Bonus Categories

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Chase Freedom® Highlights

If you’re looking for a card that lets you earn up to 5x points for every dollar you spend, look no further than the Chase Freedom®. With this card in your wallet, you’ll earn 5x points on your first $1,500 spent in categories such as retail, gas, or groceries that rotate every quarter. In addition, you’ll earn 1x points for every dollar you spend elsewhere — all of this with no annual fee.

With any card that offers cash back on purchases with rotating categories, it’s important to get the one that matches your spending habits at the places you shop frequently in order to reap all of the rewards. Keep in mind that Chase doesn’t count purchases at Target and Walmart, so if you’re a frequent shopper there, you may be better off with the Discover it® Cashback Match™. Read our full review of this card here.

Who Should Get the Chase Freedom®:

• Someone who wants to score up to 5% back in rotating categories
• Anyone who also has the Chase Sapphire Preferred® Card
• People who don’t like paying annual fees

How to Use It:

• Pair it with the Chase Sapphire Preferred® Card for additional travel options and the ability to transfer points.
• Max out 5% bonus categories when it makes sense.
• Use your card for all of your purchases to earn more points over time.

Earn Double Points Your First Year

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Discover it® Cashback Match™ Highlights

The Discover it® Cashback Match™ is similar to the Chase Freedom®, but its first-year benefits set it apart. Discover not only offers 5x points on your first $1,500 spent in rotating categories and 1x points on all other purchases, also for no annual fee, but also matches your first-year earnings at the end of 12 months.

So, in the categories where you already earn a cool 5% back, you’ll actually end up earning 10%! While all that’s great, you’ll ultimately want to make sure that the spending categories line up with your shopping habits. Keep in mind Discover isn’t accepted at as many places as Visa, so the Chase Freedom® may be the better choice for you. Read our full review of this card here.

Who Should Get the Discover it® Cashback Match™:

• Someone who doesn’t want to pay an annual fee
• Anyone who wants to earn up to 10% back over the course of a year
• Someone who is looking for one general card to meet all their basic needs

How to Use It:

• Maximize 5% categories to earn 10% back once your bonus doubles.
• Use your card for all of your everyday spending to maximize rewards.
• Shop through the Discover shopping portal to rack up rewards even faster.

Want to compare even more cash back credit cards? Check out our in-depth review of the Best Cash Back Credit Cards.

Best Balance Transfer Credit Cards

Best Balance Transfer Credit Card with a No Fee Option

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Chase Slate® Highlights

If you’re looking for a balance transfer credit card that charges minimal fees, the Chase Slate® should be at the top of your list. With this card, you’ll get a 0% introductory APR on transferred balances for a full 15 months. Better yet, if you transfer your balance within the first 60 days, you won’t be charged a balance transfer fee.

Since this card doesn’t charge an annual fee either, you can save a chunk of money on interest by transferring your balance without getting loaded down with charges. Keep in mind though, you can only transfer balances from a non-Chase card. Read our full review of this card here.

Who Should Get the Chase Slate®:

• Anyone with high interest credit card debt
• People who don’t want to pay an annual fee
• Anyone who wants to avoid balance transfer fees

How to Use It:

• Transfer your high interest balances within the first 60 days to avoid balance transfer fees.
• Pay down your debt as quickly as you can, preferably within the 15-month 0% introductory offer.
• Keep your card open to build credit.

Best Balance Transfer Credit Card with Rewards

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Discover it® Cashback Match™ Highlights

While the Discover it® Cashback Match™ is known for its amazing cash back benefits, this card is equally good as a balance transfer card. Once you sign up, you’ll get a 0% introductory APR for a full 18 months. If you have high-interest credit card debt, getting a 0% introductory APR for 18 months can save you a bundle and help you get out of debt faster. On the downside, you will pay a 3% balance transfer fee on the amount you transfer over. As an added bonus, this card also offers 1% to 5% cash back on purchases and a 0% introductory APR on purchases for the first six months. Plus, you’ll never pay an annual fee.

Who Should Get the Discover it® Cashback Match™:

• Anyone who has credit card debt
• People who want to earn cash back on each purchase they make
• Someone who doesn’t want to pay an annual fee

How to Use It:

• Transfer your high interest credit card debt to the card right away.
• Pay off your debts as quickly as you can, preferably within the 18-month 0% APR introductory offer.
• Use your card for purchases to earn rewards, but be careful of interest on new purchases.

Want to compare even more balance transfer credit cards? Check out our in-depth review of the Best Balance Transfer Credit Cards.

Additional Credit Card Research

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Did You Know?

How to Make The Right Credit Card Work For You

When used correctly, credit cards are powerful tools to help manage cash flow, and “earn” on your everyday spending. However, used improperly, credit cards can wreak havoc on your finances. Below are a few tips to make sure you get the most out of your credit card.

Research your rewards program

I can’t tell you how many times I have heard people complain about having trouble redeeming airline miles. The thing is, with a bit of research ahead of time, they would already know that airline miles are incredibly difficult to redeem, especially during peak travel times and within a few months of departure. This is where it pays to educate yourself. If you plan to sign up for a card that is tied to a specific program, such as an airline or hotel chain, you should first have an idea of what you would want to redeem your points for — and if it’s even possible. If you don’t want to be tied down to a specific rewards currency, you can also opt for a cash back card or one that offers flexible rewards. One good option is the Chase Sapphire Preferred® Card.

Don’t Be Afraid to Get Multiple Cards

A huge misconception in the world of credit cards is that it is bad for your credit to have more than one or two cards. Because a large percentage of your credit score is based on your balance-to-limit ratio, having a large credit limit spread over several cards and a zero balance can actually be better for your credit score than just having a few cards. Meanwhile, carrying more than one card can also help you leverage the different benefits and perks that different types of rewards cards have to offer. For example, you could get a hotel card for free hotel stays and a cash-back card to help you pay for the gas to get to your destination.

Always treat your credit card like cash

In order to maximize rewards without getting in trouble, you need to treat your credit card like cash. This means only spending amounts you have incoming each month, and not a penny more. The quickest way to enter the credit card downward spiral is to use a credit card to make a large purchase you cannot afford. If you don’t have the cash to pay for something, don’t use credit as an excuse to justify the purchase. Only charge what you can afford to pay off each month — period.

Cash In on Hidden Benefits

Although the best credit cards offer a slew of obvious benefits including cash back and travel rewards, many offer a handful of hidden perks that aren’t always advertised. You might have to dig deeper to find them, but these “extras” can truly come in handy. If used correctly, they can even help you save money, travel safer, and protect yourself from undue risk. Here are a few credit card benefits not everyone knows about, and some information on how each one works:

Benefit #1: Zero Liability

Although consumer liability for fraudulent purchases made on credit is limited to $50, the best cards take that protection a step further and offer zero liability for transactions you didn’t make. If your card is lost or stolen, or if a random charge appears on your bill, you won’t be liable if you report it immediately.

Benefit #2: No Foreign Transaction Fees

Many of the best credit cards on the market charge a foreign transaction fee equal to 3% of your purchase for charges made overseas. However, some waive this fee altogether — a feature that can help you save when you travel out of the country.

Benefit #3: Rental Car Coverage

If you rent cars frequently, you have probably already checked to make sure your personal auto policy provides this type of coverage. However, it’s also important to check with your credit card as well. While some cards only offer a secondary Collision Damage Waiver (CDW), others offer expensive primary auto rental coverage as a free perk to cardholders.

Benefit #4: A Free FICO Score

Although you can pay to get your FICO score at any time, several of the top rewards cards offer a free FICO score on your monthly statement or bill. This can save you the expense of paying to see your credit score, while also helping you monitor fluctuations in your score over time.

Benefit #5: Emergency Travel Assistance

If you find yourself in a bind, it is possible your card issuer could help. That’s because many of the best rewards cards offer emergency travel assistance for individuals traveling at least 100 miles from home. Perks include helping find lost luggage to booking alternative travel plans.

Benefit #6: Free Travel Insurance

Although benefits vary, several of the top rewards cards offer trip delay or trip cancellation insurance that will reimburse you if your itinerary is changed due to issues beyond your control. This type of insurance is most often used when a trip is canceled due to the unexpected death of a family member, an accident occurs, or a natural disaster puts travel plans on the back burner.

Benefit #7: Extended Warranties

Many of the top cards offer extended warranties that kick in if something goes wrong outside of a qualified item’s traditional one-year manufacturer’s warranty. Depending on the circumstances, this type of coverage usually reimburses you or sends you a replacement.

Benefit #8: Price Protection

Some cards offer price protection, which will pay you the difference on a large-ticket item if it goes on sale shortly after you purchase it. The most popular program is Citi’s Price Rewind. With Citi’s service, you will be automatically reimbursed for the price difference if any large item you buy and register is found at a lower price within 60 days.

Benefit #9: Roadside Assistance

If you have a credit card that offers roadside assistance and you experience a breakdown, all you need to do is call the number on the back of your card. You’ll be charged a flat fee depending on what type of service you require, but at least you won’t be left at the mercy of your local tow truck company.

Benefit #10 Access to Cash

While not common, some credit cards give you access to cash at the register similar to your debit card. For example, with Discover’s Cash Over program, you can request cash back at the register and avoid a trip to the ATM — and without paying any fees. This benefit is only available at participating stores.

The Bottom Line

The very best credit card for you depends on your circumstances, spending habits, and personal financial goals. While credit cards have gotten a bad rap over the years, their myriad benefits make them worth considering if you’re able to avoid the allure of overspending. If you’ve gotten this far, you’ve learned how to select a great card from thousands of possibilities. You have also learned some basics for using credit cards, seen some pitfalls to avoid, and have been exposed to many hidden benefits credit card pros have been exploiting for years. Now it’s up to you to use your card responsibly, and make sure your card is another tool in your financial tool belt.

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