It’s time for five questions.  We answer questions about liquidity, building credit, paying yourself first, vacations and credit card rewards.

1.  When do you take the time and money to go on vacation?  Whenever you can!  Segment an area of your checking account that is your vacation fund and contribute weekly or monthly, just like your investment account.  Check out my article on ways to travel on the cheap.   You kind of know when you’re getting to the point of needing a vacation.  It’s the point at which everyone you encounter is your potential murder victim.  Try to feel when this is becoming an everyday feeling and plan your trip a few weeks before that.  Bail is expensive.

2.  I’ve recently taken out my first, small student loan.  I want to build credit.  To do so, is it better to pay if off according to the plan the lender set up or should I pay it faster?  If you want to build credit, don’t pay it off faster.  It will give you less on-time payments which are reported to the credit bureaus.  But debt is an emergency, it would be better to pay the loan off and open a secured credit card in order to build your credit score.  Being debt free is more important than a credit score.

3.  How do credit card companies sustain all the rewards offers they make like cash back and airline miles?  Every time you use a credit card, the merchant pays a transaction fee.  For big spenders who use their card for everything, this means big bucks for the credit card companies. For those of us who pay our balances in full, we are also subsidized by those who don’t and are paying all that interest.

4.  I know that you should pay yourself first but is that true even when you’re trying to pay down debt?  Yes, if you have debt, you probably haven’t been paying yourself first for a long time.  The best way to do it is to have a certain percentage of your pay routed to an investment account, that way you don’t miss it.  This would be after you have $1000 in a checking account as a beginner emergency fund.

5.  Is there high liquidity in the stock market?  Yes, it’s just a matter of a day or two to pull money out of the market.  Much more quickly accessed than having to sell a house for instance.

Thanks for the questions everyone, keep them coming!

 Show Notes

Blue Moon:  A Belgian white.

Richest Man in Babylon:  Money lessons taught through parables.

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