The Truth About Department Store Credit Cards

If you’ve ever shopped in a department store, you know the story. Maybe you picked up a new set of cutlery, registered for a wedding or tried on some new dresses. Whatever the reason for your trip, the checkout process is always going to start the same way – “Have you signed up for our store credit card?”

The interest rates and perks may vary, but pushing a retail credit card is standard practice at many department, big box and outlet stores. They usually include a signing bonus or discount that can be applied to the purchase you’ve come for, making them a tempting offer for anyone looking to save a quick buck.

But what are the consequences of signing up for retail credit cards? In what ways do they differ from standard cards? Should they be approached cautiously, embraced fully or avoided entirely?

Why You Shouldn’t Use Them

Retail credit cards are tied to specific stores and often offer discounts when you sign up initially. Some also offer extra sales and coupons such as an additional 10% on top of another sale. But they can be a dangerous entry to the world of credit.

Unfortunately, the benefits and rewards of retail cards are often tied to the store directly, so you’re encouraged to spend more there to see the benefits. A sale at your favorite clothing brand might not entice you unless you have a store credit card that offers an extra 10% when you use the card.

Some store credit cards can also hurt your credit score, depending how you use them. Many offer lower credit limits than other types of credit cards, which can affect your credit utilization.

For example, if you have a credit limit of $500 on a department store’s credit card and spend $200 on a new duvet, your utilization percentage will be 40%. An ideal credit utilization percentage is 30% or less – any higher will negatively impact your credit score.

Store credit cards also often have higher interest rates than other cards, which will negate any discount you receive from using them. The cards are mostly aimed at short-sighted consumers, so those who take the time to weigh all the factors are less likely to be drawn in.

When to Sign Up

These cards aren’t completely useless. If you’re still building a credit history, a store credit card can be a good way to get your foot in the door. Their standards may be lower than other major credit cards and can prepare you for the “big leagues.”

Before applying for a store credit card, find out if they report to the three major credit bureaus – Experian, TransUnion and Equifax. These bureaus are responsible for your credit reports so if they don’t report to them, you won’t be able to build up a credit history.

Using a store credit card wisely can teach you how to be responsible, avoid temptation and build a credit history. After a few months, you may find yourself eligible for better rewards cards, including ones with large cash back or travel bonuses.

Stores that you frequent, like a superstore, can be good options in this situation. If you’re going this route to build credit, try to use a credit card from a store you’ll actually frequent.

The trick is to not spend more than you would have just because you’re receiving a small discount. That’s how these store credit cards really profit the companies they’re created by, and why they’re pushed so heavily in the checkout line. They know the money lost from the discounts they offer will pale in comparison to the extra business they’ll drum up by offering them – and now you do too.

Zina Kumok is a freelance writer specializing in personal finance. A former reporter, she has covered murder trials, the Final Four and everything in between. She has been featured in Lifehacker, DailyWorth and Time. Read about how she paid off $28,000 worth of student loans in three years at Debt Free After Three.

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Mint Success: Going From Carrying Debt to Paying it Off

Once upon a time, Scott Henderson used credit cards like “free money,” maxing out his balances and getting cash advances to pay for wedding expenses – then carrying those balances forward monthly, paying the only the minimum.

He wasn’t alone: 34% of Americans carry credit card balances vs. paying the cards off every month (and 35% of Mint users do the same).

But once Scott, a peer mentor at University of Utah, and his new wife took a good look at how this debt was affecting their financial picture, everything changed. They used Mint to set their goal and keep track, and the rest is history (and the future).

What kind of credit card debt did you have before you started paying them off?

When we started paying down our credit card debt, we had four credit cards. One of them was maxed out to nearly $1,500, and the other cards were nearly maxed out as well. I didn’t fully understand how a credit card worked before I got married, other than it was pretty much free money to me. When I decided to get married, I made cash advances to pay for my wife’s wedding ring and maxed out all of my cards. I later found out the many reasons why that was a bad idea.

What led to your decision to pay off your credit card debt?

A few months into marriage, my wife asked me why I had been carrying such high balances on my credit card. I said, “because of you!” That’s when we decided to get serious.

How did you use Mint to help?

When we realized we were carrying more debt than we could handle (and it was only getting worse), we decided to set a goal in Mint to pay down our credit card debt. It let us know that if we were to pay only the minimum payment each month, we would never pay off our debt. Instead, we put as much money toward our credit card debt each month as we could manage and were able to pay it off in a reasonable amount of time.

How long did it take for you to pay off all the credit card debt?

It was the first year of our marriage of sacrificing things to pay off our balance completely. But one year into marriage it felt extremely good to know we no longer had credit card debt. Now that we pay off our balance each month, it is still easy to let it get out of control, but we dedicated ourselves to never carry a balance again.

How does Mint help you now?

Checking Mint every few days helps me to know what categories I am spending the most on, my monthly average amount of expenditures, upcoming bills, my credit card balances all in one place, and so many other things.

How do you use credit cards now?

We put everything on our credit card to build rewards, points, miles and increase our credit score. My wife and I pay off the balance every week and before the credit card companies report to the credit bureaus. The greatest part about it is now that we don’t carry a balance we don’t have to pay interest.

How has your lifestyle changed since going from balance carrier to balance payer?

We feel we have more freedom to do the things we want to do. We don’t pay for things we did last year that we don’t care about anymore. Now that [the debt] is paid off, we are able to put all that money towards our first home.

Now that we are balance payers, we have a budgeting system that we set up where each time we get paid, we are so excited that we both argue about who gets to break up the money into the different accounts.

You can be like Scott

We can identify with the excitement of budgeting and tracking goals! Next month we will look at how recent college graduates or people just starting out in their careers use mint to build a promising financial future.

Are you one of those? We would like to hear your story! Contact us at Editor_Mint@intuit.com with “Mint User Story” in the subject.

Kim Tracy Prince is a Los Angeles-based writer who also paid off her credit card debt after getting married! She recommends doing it before, if you can.

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Mint by the Numbers: Which User Are You?

Data and analytics can tell us a lot about people – what can it tell us about you? Find out how you can tell your story in a future post!

Did you know Mint has been around for ten years? Over this decade, we’ve grown to include over 20 million users!

With the vantage of time and numbers, we are now able to identify trends in the ways you use Mint. Our analytics wizards looked at different characteristics and behaviors, and we found the data fascinating. It tells us so much about how people using Mint spend and save, and how Mint can be useful to people with wildly different financial lifestyles.

Over the next few months we will be sharing this information with you, and we want to tell your stories. Can you see yourself in the numbers? Each month we will look at a different topic and show you what Minters are like, gleaning the info from the data.

The first thing we looked at was credit card usage.

By the Numbers – Credit Card Users

Looking at so many Mint users, a clear division in credit card payment behavior emerged.

Carriers vs Payers Debt Pie Chart

The trend is clear: 35% of active Minters carry credit card balances from month to month,  while the remaining 65% pay their previous month’s balance in full, or even their entire balance every time they pay.

Does this sound familiar? These numbers line up with national ones – as of 2014, about 34% of American households carried at least some credit card debt.

What’s even more interesting is that certain other characteristics line up with credit card payment behavior. Take a look at this comparison:

Table

What the Numbers Tell Us

In general, people who pay their balances off regularly tend to pay less for their credit cards, which they use for regular spending. They check into Mint more often, which could help them to keep track of their spending and stay on top of due dates.

Some more trends we can see have to do with lifestyle and background. More women and married couples carry balances versus those who pay their balances off, and the data shows people who reported living with children are more likely to carry high balances.

People who pay their balance tend to be more educated and have higher incomes. Plus, they tend to save more and invest more than people who carry balances month to month. Data shows the best savers tend to be previous month balance payers, followed by full balance payers.

Conversely, people who carry balances are more likely to have personal loans (not mortgages), but those who use over 50% of their credit card limit are less likely to do that, which suggests that they cannot qualify for or haven’t considered a personal loans to consolidate debt.

Real Talk

We ran an informal poll on Twitter to see what people are saying online.

Twitter Poll

Over there, 24% say they carry a balance month to month. Some are deliberately doing it to build up their credit score. (To learn about the wisdom of that strategy, keep your eyes out for more info in a future post.) But 73% pay their balances every month, like this guy:

Twitter Response 1

Nate Thompson ‏@NateUT  Apr 3
Holland, OH
@mint yep charge everything to my #amex card to get points, pay it all off at the end of each month!

Follow the hashtag #realtalkseries and @mint on Twitter to participate in our next poll!

Which Mint User Are You?

Do you consider yourself a balance payer or a balance carrier? Do your other spending/saving habits line up with what you see here?

We want to talk to you! We would love to find out if Mint helped you get ahead of your credit card debt, or if you’ve always been a balance payer, or if you are struggling to pay down your debt and could use a helping hand from Mint to get it done.

In future months, we’ll be focusing on housing (owning or renting), how to live on less, traveling the world, and student loans. If any of these topics fit your financial goals or dreams, please let us know and we might feature your story!

Contact us at Editor_Mint@intuit.com with “Mint User Story” in the subject. We can’t wait to hear from you!

Kim Tracy Prince is a Los Angeles-based writer whose Mint story goes back to 2012. She works hard to stay in the “balance payer” category.

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Which Debt Repayment Strategy Is Right for You?

We’ve focused on giving you the information you need to know to get rid of your credit card debt once and for all this month. So far, we’ve explained how to get your debts organized and how to balance building up your savings while paying down debt.

Today, we want to discuss how you can choose a debt repayment strategy to make sure you stay on track and reach debt freedom as soon as you can. These methods can help you power through and repay every last balance.

The Debt Snowball

The debt snowball is a debt repayment strategy popularized by financial guru Dave Ramsey. This method asks you to take stock of all your debts — loans, credit cards, mortgages, and other lines of credit with balances — and list them in order of smallest balance to biggest.

That’s the only factor you need to take into account. So, for example, if you have three student loans and owe $5,000, $10,000, and $15,000 respectively, that’s exactly the order you list them out in. And that’s the order you’d work to pay them off in, too.

The debt snowball has you put as much money as you can toward your debt with the lowest balance first, while still maintaining minimum payments on your other balances. Once you repay that first debt, you take the amount of money you were applying toward it, and combine it with the minimum payment you were making on the loan with the second-lowest balance.

Your payment on this second-lowest balance loan “snowballs,” because the payment is the combination of what you paid toward the first loan and the minimum payment you were already paying on the second.

You’ll continue to snowball your payments and knock out your debts one by one, until you’re debt free.

The Debt Avalanche

The debt avalanche is another system for repaying your debt. With this strategy, you again take stock of all your debts and list them out — but this time, you’ll order them by interest rate.

With the debt avalanche, you’ll list them out in order from highest interest rate to lowest (regardless of balance). Then you’ll work to repay the balances in that order, taking out the loan with the highest interest rate first, then the second-highest, and so on.

The only difference from the debt snowball is the order in which you repay your loans. The biggest advantage to the avalanche is, from a mathematical standpoint, you come out ahead because you’re getting rid of your most costly loans first. Because you’re knocking out loans by interest rate, you’ll gradually pay less in interest over your repayment period.

Choosing a Debt Repayment Strategy

There’s no “wrong” way to knock out balances and become debt-free. But there’s probably one strategy that works best for you over other options. So how do you choose the ideal system for your personal situation?

Start by understanding your own personality. The right strategy is likely the one that’s a good fit for you and the way you think. It’s not necessarily about the details of your debt.

The debt snowball does a good job of taking the emotional and behavioral part of personal finances into account. For many of us, money is about more than just the numbers — it’s how we feel and think about it.

The snowball can keep you on track because it gets you to a “win” quickly. Since you’re paying off the lowest balance first, this repayment strategy will likely knock out your first loan faster than other methods of paying down your debt.

This can be the difference between sticking to the hard work it takes to become debt free, and getting frustrated and overwhelmed by the process.

The debt avalanche is, mathematically speaking, usually better than the snowball. That’s because you focus on getting rid of the debt with the highest interest rate first, regardless of balance. This should save you money over the long-term because you’re lessening how much you’re paying in interest.

But if your highest-interest loan also comes with a bigger balance than your other loans, it’s going to take you longer to repay that debt than if you focused on knocking out loans with balances in order from smallest to largest. For some, it’s emotionally tough to have that first milestone be further down the road.

And that’s okay — it feels good to get rid of loans or balances on your lines of credit!

It all depends on what motivates you. If paying off your first loan ASAP will keep you going and prevent you from feeling discouraged or hopeless, choose the debt snowball. If you want to put an end to interest rates eating up your discretionary income, choose the debt avalanche.

2016-04-15_13-44-43

What About Debt Consolidation?

Debt consolidation is another strategy that may be helpful if you’re struggling to keep track of multiple loans and their payments, due dates, and other information. Consolidation can also help those who have high interest rate loans but good credit scores (be sure to check your credit score with a free credit report on a regular basis).

When you consolidate, you start by taking out a single loan for the total amount of the debt you want to repay. You take the borrowed money from the new loan and repay all the individual loans with balances you already had. Then, you work to repay the single, new loan.

This is a good option if you’re feeling overwhelmed because it simplifies your financial situation. Instead of having multiple loans to keep track of, consolidating leaves you with a single loan — with a single interest rate, monthly payment, and due date.

It’s also worth looking into if your current loans carry high interest rates that cost you money. There’s no guarantee, but you can shop around with different lenders to possibly consolidate existing loans for a lower interest rate. This not only simplifies your debts — since, again, there will only be one balance to keep up with — but it could also save you money if you can get a lower interest rate.

Just make sure you take all the fees into account. A new loan may come with a lower interest rate, but the loan origination fees may mean it’s a wash when it comes to saving money. Everyone’s situation is different, so do the math before making any decisions.

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Family Matters: Affording Care for a Family Member

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Twenty-three year-old Emilie Lima Burke has started to save $20 per day.

It’s not for a vacation or her retirement fund. Instead, she’s preparing for the moment she expects she’ll need to take care of her aging dad and all his expenses.  Burke, who runs the site BurkeDoes.com, a financial, health and career resource for millennial women, says that her parents used to joke that she and her sister would be “their retirement plans.”

But that’s seems no longer a laughing matter.

“My dad has struggled with long bouts of unemployment…He has no money saved at all,” says the 23 year-old. “I know that at some point I will be [his caregiver]. When there is no retirement fund or any assets for aging parents to fall on, you just have to make a plan.”

We’re living longer these days, which means that many of us have the great fortune of growing older with our parents. The number of Americans ages 65 and older expected to nearly double by 2050, according to the U.S. Census.

With longevity, though, comes the increasing responsibility and financial pressure to care after our aging family members, especially, if like Burke, our family doesn’t have a financial plan already in place. The average working household has “virtually no retirement savings.”

It’s no surprise then that about one in four Americans (with parents ages 65 and older) is helping a parent with his or her affairs, offering financial help or caring after them.

And not to cause alarm, but more than half of the country – 29 states – have so-called “filial support” or “filial responsibility” laws that could potentially require adult children to pay for their parents’ care if they don’t have the means to do so for themselves.

If you’re struggling to support a family member or anticipate needing to care after a loved one down the road, here are some ways to help make your efforts more affordable.

Know Their Bottom Line

If a family member is turning to you for help, particularly financial help, then it’s more than appropriate to have a candid money talk – no matter how uncomfortable it may be.  Ask to see how much they have in the bank, as well as what other streams of income they may be receiving (e.g. social security, a pension, insurance payout, a portfolio distribution, etc.). Create a budget to pay for as much as possible with your parent’s income and assets before tapping your own bank account.

“I see people who take on credit card debt or stop paying their own bills to care for their parents, but a much better option is to first exhaust all of the resources that the parents can have access to,” says Belinda Rosenblum, a financial strategist at OwnYourMoney.com.

Having a paper trail of statements showing income and expenses will also prove helpful if your parent needs to apply for Medicaid, the health insurance program designed to help those with little money. Here’s where you can learn more about Medicaid eligibility.  Care facilities sometimes have a Medicaid expert on staff to assist with your application, too.

Reach Out to Local and National Resources

When business coach Amanda Abella’s grandmother was diagnosed with Alzheimer’s a year ago, her family needed to find a way to pay for her extra care. The adult day care alone, she estimates, would have cost $100 per day.

For guidance, they turned to her grandmother’s doctor and the social worker at the hospital and discovered the Alliance for Aging, a Florida-based private, not-for-profit that provides a range of services to older people, including personal care, legal help, transportation, meals, etc. After several rounds of interviews and almost a year of being on the wait list, Abella’s grandmother succeeded and now receives free nursing care.

The lesson: Never assume that you have to go it alone. Help is out there. Local and national resources offer grants and support to seniors. To start your search for funding visit: Family Caregiver Alliance and Paying For Senior Care.

Also worth mentioning: If your aging parents are veterans look into the Department of Veterans. “Often veterans overlook or are not aware of the benefits they are eligible for such as medical care or prescriptions, especially if they’ve been separated from the military for a long time,” says military money life coach Lacey Langford.

Look Into The Family and Medical Leave Act (FMLA)

If you need to take time off work to care for a family member, be it a parent, child or even yourself, but worried about losing your job in the process, you may benefit from the Family and Medical Leave Act (FMLA).

The federal law grants certain workers up to 12 weeks of unpaid leave per year with the promise of getting their jobs back. You can also keep your company health benefits during your time off. Some states such as California, New Jersey and Rhode Island allow qualified workers to earn at least part of their paycheck during this time.

Remember the Tax Deduction

Track expenses and if you afforded more than half of your parent’s needs during the tax year (including utilities, medical bills, food and general living expenses) and he or she earned less than $4,050 (not counting social security), then you may be able to claim mom or dad (or both) as a dependent on your 2016 tax return. Doing so offers you additional tax benefits. You can find more information on how to claim a parent as a dependent on TurboTax.com.

Keep in mind that whether or not your parent qualifies as a dependent, you might be able to deduct the medical expenses (including prescriptions and doctor visits) you paid for on his or her behalf from your taxable income. The IRS requires the total of these expenses to be more than 10% of your adjusted gross income in order to claim the deduction.

Consider Long-Term Care Insurance

If your parents have yet to reach the age where they may need some assistance, see if they’ve looked into long-term care insurance. This can come in handy if they think you may need to afford a nursing home or at-home care later down the road. (And about 70% of Americans who reach age 65 will likely need some time of long-term care before as they age). Medicare does not cover these costs and they can be very expensive.

For example, the average cost of a home health aid, which long-term care would cover, can be anywhere from $34,000 to $57,000 a year depending on where you live.  If your parents don’t have enough saved to cover this, it may fall on your shoulders. It’s just as beneficial to you for them to seriously consider long-term care.

You may decide to purchase a policy yourself and have your parent(s) be the beneficiary.

Keep in mind that the ideal time to buy long-term care is when your parents are in their 50’s and 60’s (specifically between 52 and 64). The younger and healthier the beneficiary is, the more likely he or she will qualify (and the lower the monthly premium). For a couple in good health applying for long-term health care in their mid-50s, the average annual cost is about $2,350 (or less than $200 a month).

Create a Family Fund

Finally, like Burke, it pays to start saving early for the financial what-ifs surrounding our family members.

You can hope for the best, but should also prepare for the worst. Tucking away even $10 or $15 a week for the next five or ten years while your parents are still able to take care of themselves could yield an essential nest egg for everybody when life takes a turn.

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at farnoosh@farnoosh.tv (please note “Mint Blog” in the subject line).

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

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How To Strike A Balance In Real Savings And Extreme Couponing To Save Time And Money

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Everyone loves a good deal. Collecting coupons can help you balance your budget and save big, but it can also eat up your time. To succeed at couponing, you’ll need to find a system that helps you get the most bang for your buck without spending all your free time searching for the lowest prices on your favorite products.

Coupons are everywhere

Coupons aren’t just for groceries. In fact, 74.7% of available coupons are for non-food items. Billions are distributed every year, and once you start looking, you’ll begin to spot them everywhere. The bad news? It’s easy to get overwhelmed.

Extreme “couponers” spend huge amounts of time accumulating and using them to amass major savings. While the money saved can add up, collecting paper or online coupons is a time-consuming hobby. It takes time to track down the deals you want or need, organize the coupons based on when you want to buy the product, and find the store carrying the item. You’ll also need to consider the additional time it takes to store the purchased items in your home.

With so many deals to be had, it can be easy to go overboard. The good news? You don’t need to resort to extreme couponing for it to have a positive impact on your budget. It’s easy to find coupons in print publications, on product displays, and posted on coupon-devoted websites. Grocery store websites even let you instantly load their coupons directly onto your loyalty card.

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How To Strike A Balance In Real Savings And Extreme Couponing To Save Time And Money

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Couponing time management

Before you start hunting, create ground rules to help manage your time. Remind yourself that your time is as valuable as your money—maybe even more so. These tips can help ensure that the time you spend couponing is worth it.

Track your payoff

It’s just as easy to track your progress as it is to collect coupons. Create a timecard and keep track of the time you spend couponing for one month. During that same month, keep your receipts.  At the end of the month, total up your coupon savings and divide it by your time spent. How much did you make an hour? Seeing the numbers can help you decide how much time you want to commit to couponing.

Even if being a regular “couponer” isn’t for you, occasionally using coupons for big and small purchases is still a smart idea. After all, any money saved is time well spent.

You can find savings and coupons for a variety of home goods on Groupon’s Bed Bath & Beyond page here. 

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Hey, Big Spender! Can You Afford It?

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Big goals can carry price big tags. Whether you plan to buy a home, a new car or treat yourself to a much-needed vacation, you’ll need the money. And before you can really start planning for these big expenses, you’ll want to ask yourself, “Can I (or should I) afford it?”

If the answer is yes, then begs the question, “What’s an appropriate amount to spend?”

Here’s some advice on how to tackle a few big-ticket buys. And, if saving money isn’t exactly your strong suit, keep reading. I’ve included some of my favorite resources to get a jump-start at the end.

Buying a House? Cap Monthly Payments at 30%

When it comes to budgeting for housing costs, my rule of thumb is to spend no more than 30% of your take-home pay. That includes the mortgage, property tax and maintenance payments. The truth is that becoming a homeowner comes with hefty responsibilities and often, unforeseen costs.

Should your new home require a repair, you’ll want to be able to comfortably afford it without stretching yourself too thin. A rookie homeowner mistake is assuming you can spend the same monthly cost on a mortgage as rent. But renters aren’t necessarily required you to pay for plumbing damage or repair broken major appliances on their own dime.

Once you’ve calculated how much you can spend per month, figure out what size mortgage that equates to and that should help you narrow down homes by price. Home search website Zillow.com has a calculator that produces your target home price based on your annual income, monthly debt payments and the size of your down payment.

Speaking of, you’ll want to prepare to put down 20%, especially in competitive markets. For more on the specifics of home buying, check out my previous blog post.

Save more: To minimize monthly mortgage payments, be sure your credit is in great standing. Borrowers with high credit scores (often a 760 or greater) are best suited to qualify for the lowest interest rates on a home loan in today’s market.

Eyeing a Car? Ideally, Budget 15%

When it comes to purchasing a new car, aim to spend no more than 15 to 20% of your take-home pay. This includes maintenance and gas. if you pay with cash, take your annual salary and multiply it by .15 to calculate a max spend.

If you plan to finance or lease the vehicle, take your monthly take-home pay, multiply that number by .15 and that is a healthy budget for car payments (assuming you don’t have other major outstanding debt).

Save More: Go pre-owned. If you’re okay with a few scratches and some wear and tear but with the assurance that the car comes with a manufacturer’s warranty, then opting for a pre-owned vehicle could be a great way to save anywhere from probably 10 to 25%. This option can be more costly than going with a regular used car. But CPO’s come with benefits like a longer warranty and proper inspections.

If you’re set on purchasing a new car, wait until the end of the year when dealers are desperate to unload the current year’s models to make room for new inventory.

And for what it’s worth, waving cash at the dealer won’t necessarily earn you any discounts (unlike in years past). I recently purchased a new car and thought we would get a lower price by offering to pay entirely in cash. Wrong. Turns out, by signing up for auto-financing I was able to score a discount. With the loan interest rate at only 2% I decided to finance the car and commit to paying it off within the year (as opposed to four years) to keep interest payments to a minimum.

Fancy a Piece of Jewelry? Or any Luxe Item? Mind Your Savings.

Who doesn’t want to treat themselves to a little something every once in a while? Personally, I’ve been eyeing the new iWatch.  But for such discretionary expenses (aka “splurges”) it’s best to pay them with cash on hand. If you can’t pay it off in a month, then I question whether it’s really something you can afford. If it’s a financial stretch, perhaps it’s wiser to hold off on the purchase?

For discretionary or miscellaneous expenses, I think it’s responsible to cap spending at no more than five percent of income and that includes things like luxury items and recreational spending. If you need to tap savings, just be sure you replenish the account within the next month and aim to leave yourself with at least a six-month rainy day cushion at all times.

Save more: Similar to pre-owned cars, what about buying secondhand? Tradesy and Poshmark are two websites that have a large inventory of gently used (or in some cases brand new, but discounted) designer goods. These online vendors verify that items are authentic and match the seller’s description.

Sallie Krawcheck, Wall Street veteran and co-founder and CEO of the online investment platform Ellevest, revealed to me on my podcast So Money that discount site The RealReal is her go-to place to splurge. She calls it “financially savvy.” Hey, if it’s cool for her, then it’s cool for me!

Longing to Getaway? Time it Right.

I always say it’s most rewarding to spend on experiences, especially travel. It’s important to recharge your mind, body and soul or to simply learn about other cultures.

For vacations, again, coming from your discretionary budget, aim to spend within 5% of your take-home pay.

Save more:  Depending on when you book your flight you can earn more bang for your travel buck. Data from FareCompare show airfare tends to fall to its lowest level all week on Tuesdays starting at 3pm. That’s typically when airlines release the greatest number of deals and subsequent pricing wars lead to low prices.

Need Help Saving?

All of the above assumes that you have money left at the end of the month after covering your bills to save up and spend on big-ticket items. That may be a big assumption. Many of us live paycheck to paycheck and quite frankly, as humans, we’re not exactly hard-wired to save. As famed behavioral expert Dan Ariely once told me, “We see something, we want it and we go for it without thinking very much. The world is designed to tempt us and we follow and get tempted.”

Here are some free tools that can help us to curb some of that ill-fated temptation.

Have a question for Farnoosh? You can submit your questions via Twitter @Farnoosh, Facebook or email at Farnoosh@farnoosh.tv (please note “Mint Blog” in the subject line).

Farnoosh Torabi is America’s leading personal finance authority hooked on helping Americans live their richest, happiest lives. From her early days reporting for Money Magazine to now hosting a primetime series on CNBC and writing monthly for O, The Oprah Magazine, she’s become our favorite go-to money expert and friend.

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