Vacation Credit Card

Just coming back from a month long trip in New Zealand, I thought it would be a good opportunity to talk about vacation. I'll probably split this topic over the next few posts with this one focusing on how to get access to foreign money.

Vacations are important for any balanced lifestyle.  It offers the opportunity to relax and rejuvenate as well as seeing new places and exploring new cultures.  If taken at home, you are able to rest your body and mind to better prepare yourself for work when it resumes.  Taken abroad, vacations offer the chance to break out of your comfort zone and enrich yourself with new experiences.  Of course, you can always also explore new activities and areas in your hometown and you can relax abroad, but I find that most often that travelling to some place new invokes a greater sense of adventure.

Merchant Credit Card Fees

I have several posts lauding the benefits of credit cards for consumers, especially those with no annual fees and reward programs.  Assuming that you treat your card like cash and only spend enough to pay off your monthly bill when it comes out, there is only positive benefits: you get a 1-5% cash reward on all your spending, you delay your payment for a month which allows you to earn interest (albeit small in the current environment), you decrease the risks with carry cash like losing it or getting it stolen, and you establish/improve a credit history for future use with other loans.  However, credit card companies still need to make money.  Thankfully (in some aspects), not all of us are as careful with our spending and those who miss their payments or spend more than they can afford will be paying these banks and credit card companies high interest rates.  However, if in some magical world the majority of people were to become more responsible with their credit cards and paid all their bills on time, the only source of revenue for companies on these cards will be from fees merchants pay to accept them.  And even that is slowly going away.

International Access to Money

Roughly 60% of Americans do not have a passport according to the State Department as of January 2012.  If you belong in that majority and plan on staying in it, this post will probably not be very relevant.  However, for those of us who do have a passport and plan on using it, we have to prepare before going abroad.  Especially within my age group, many students study abroad, backpack across a different continent over the summer, or even attend college in a different country.  For those of us who haven't, learning how to get access to money is the first step.

What's Your Allocation?

Studies have shown that a very large driver of variation in returns for portfolios is derived from different asset allocations.  Focusing on having the right asset allocation can help improve your returns on investment over time and is a more reliable driver of returns than either stock picking or market timing.  There is often much debate over any "ideal" asset allocation as it differs among individuals.  I'll just go over some of the general themes and rules of thumb on how to think about asset allocation.

All About Inflation

I'm not sure how many young adults really grasp the idea of inflation.  Most people who impulsively spend probably don't need to worry as much about inflation as those who save, but hopefully you have read some of my other posts and agree that it is beneficial to budget and keep some money for the future.

The unfortunate thing is that inflation will eat away at your savings.  I'll first explain some of the basic reasons why we have money before going into detail about inflation.

Time Value of Money

Ever hear the phrase that time is money?  I thought I'd make a post for the general public who might not know much about such a topic while we learn everything about it in business school.  In this sense, there is an actual price associated with the value of money over time.  If given the choice between $1 today and $1 in a year, nobody would ever pick the latter. Intuitively, getting a $1 today and keeping it until a year from now will be the same as the latter choice, except that you have the option to spend it on something within a year if you find an opportunity.  From a financial perspective, you could also put the $1 into a bank account today and accumulate interest for a year, receiving more than $1 in a year.