So today I was reading various strategies that people use to pay off their debt. More specifically, the two methods that were in discussion was the debt snowball or debt avalanche method where one was more focused on the psychological aspect of encouraging people to pay off their bills and the other was to get rid of it as efficient as possible.

In a nutshell, for the debt snowball method you are supposed to organize all of the debt you have and your goal is to essentially pay off the smallest debt first. An example would be if you had two credit cards with an outstanding balance where you have to pay interest on it each month. You would then first pay the minimum payment on both cards so that you don’t incur interest. Afterwards, any money that you have left over should go towards paying off whichever card has the least amount of balance on it. After you are done with that you then continue on to the next debt. So as you can tell, this is supposed to give people the motivation to continue to paying off their debt.

For the debt avalanche method it would start off the same where you would first organize all of your debt and begin by paying the minimum on all of your current liabilities. However, the priority in terms of which bill you should pay off first is the one that generates the most interest debt. Mathematically, with this method you would be paying less interest fees and will ultimately be debt free faster.

This is where the debate begins as some say while one method makes more sense on paper, realistically more people are more likely to succeed with the other method as you get the sense of accomplishment faster by getting rid of small debt with the snowball method. With the avalanche method some were saying because you won’t be able to pay off a bill as fast that people will usually lose motivation to keep at it.

For myself if I was to choose I would use the avalanche method as it makes more sense. The funny thing to me is that I would say a big factor in paying off debt is the whole notion of even looking at the numbers in the first place. For example, I usually find people that spend too much are the same people that don’t even track their spending. If you were to take the first step with both of these examples I’m sure just looking at the debt and knowing where all your money is going to is the real factor that makes you want to be smarter with your money. Essentially, regardless of which way you choose you just have to do something in constantly keeping yourself informed about your finances.

So today during my time on the show AM/BC I decided to talk about getting rewards and bonuses from using a credit card and how some people actually go out of their way to make purchases to build up reward points where I think it makes no financial sense. For example, someone may be like 200 points away from buying a plane ticket and without really thinking about it they just start spending. And since people are in the vacation planning mood usually around now it cringes me whenever I hear people say they need to buy something just to earn enough points to get an item.

So as an example I first used this fifty dollar gift-card that I saw on a rewards site as this way we can puts static dollar value as to how much a rewards point is worth in this case. As you can see, for this it mentions that this $50 gift-card is worth 475 points.

As well, since during this time people usually want to do some traveling I did try to find airline tickets offer too. This company used the airline Westjet and here you can see a list of destinations and as well the cost of it. For example purposes I just used the Vancouver to Toronto cost which is 2187 points.

In order to put an actual dollar value to it, I went to the Westjet site directly and did a quick search on how much a tick would cost between these two destinations. As you can see, the price is about $282.

With that I started to break down the numbers with actual credit card reward details here such as how much points you earn per dollar and as well annual fees that may be attached to it if you want to earn points faster. This was the numbers:

In general, I think most people would agree where if you are going out of your way to spend like $9500 just to get a $50 reward it simply doesn’t make sense. Same thing with the airline ticket. On top of that, you have to factor in the annual fee to see what the real number is.

Speaking for myself, I usually prefer the cash back cards and so with the same example I used a 1% and 2% cash back rate that people can commonly find here. Based on these reward values the numbers looked like this:

While like in this example you would be spending less to achieve essentially the same dollar value, I think the bottom line again is that if you are going out of your way to spend more just to earn the bonus/reward it can actually cost you more. I think this is one of those times too where you have to sit and actually see the numbers for it to click so that you don’t just emotionally buy into a rewards or bonus program.

Finally, on the show I was saying how like in these examples sometimes just doing some old fashion coupon and promotional code hunting can probably save you more. Like in this example, with a little bit of research I was able to drop the price of this ticket by like 20% just by finding a discount code. So instead of like $282 I was able to quickly drop the price to about $225 as you can see here:

As well, I’m sure everyone is aware that when it comes to plane tickets that different days can be cheaper. In this example, just changing the flight to like a day after and using the coupon I was able to drop the price to like $209.

I personally think like here if you are going to go out of your way to save some money then spending the time and energy to find discounts probably makes more sense than spending extra money that you wouldn’t have otherwise. One site that I mentioned which I even use to help you get started is http://www.retailmenot.com/ There, you can find a lot of discount and coupon codes for a lot of different businesses. Feel free to share your sites too if you know of any other good ones.

It’s very easy with the Internet to find these deals too I say. Bottom line, treat rewards and bonuses for what it is. Basically, a bonus for what you normally do anyways.

Today I was talking to a person who’s business is very seasonal where all of his customers usually come around this time of year when the weather gets hot. The interesting thing was because he knows he will get more customers he tends to price his products higher as well. At first I was asking if this was simply due to a supply and demand scenario which made sense to me. However, he said no as it was simply based on the notion that for some reason people are willing to pay the higher prices as during this time of the year if they want to buy something then they will. Therefore, he may as well get more profit.

I was just thinking that must feel a little strange. For example, imagine doing something like offering an E-book where you originally sold it for a certain amount and because you know there is going to be an influx of customers then suddenly you increase the price. Like in this case, it didn’t really require you to do anything more or less. This is one of those things where probably a big shot would say you would be silly not to increase the price if you knew people will pay for it anyways.

However, I tend to think at this day and age information and can easily be found and if people are more aware of a company’s pricing tactic like this that the negative publicity from that is probably not going to be worth the few extra dollars you made. Unless this wasn’t exactly a long term business as you are simply looking to get in and out really fast I suppose. I personally think in a situation where if it doesn’t have anything to do with say an increase cost in doing business that your pricing should be fairly consistent as I know from a consumer point of view the word of mouth can end up costing the business more sales if people perceive it as like price gouging.

There was a scenario today which made me wonder how many others would do the same thing if the situation arose. Essentially, I went to a restaurant today for a small family gathering and in this place you would check off what you want from the menu which they would then make. Afterwards they return the list of what you ordered and then proceed to cross them out as the food is brought to your table. For one of the orders the staff seemed to have made an error as they accidentally made and charged us for something that was more expensive. Their error was apparent too since you can clearly see which dishes were marked down.

However, it was decided that we wouldn’t make a fuss about it as it will potentially get one of the workers in trouble and so we just ended up accepting the dish and the higher price tag. I was advocating though that it should have at least been brought to their attention because as a business they should want to correct their mistakes. Otherwise they will likely not even be aware that they are making these kinds of mistakes.

It does make me wonder though as I pretty much guarantee if this wasn’t a formal restaurant but rather a fast food chain that most people would have no issues in returning the item and asking for a new one. That makes me wonder, why is it that way? In both cases you could argue that asking for a new item could get the person in trouble in terms of their job evaluation.

It makes me think too about things like tipping where people say in the food industry you tip people because you know that the wage they make is very little and so they rely on those tips to survive. Again though, you could argue it’s the same for like a person that works in a fast food restaurant. So why is it so different there?

Funny enough, even for this I don’t think I have ever been told an official story on how this habit has developed. Maybe someone out there has an actual story or tale about this to shed some light.

I was talking to some people about the notion of needing a budget in order to keep your finances in good health. Basically, each month you should be writing down how much you have and how much you can allocate to certain things such as entertainment or essentials. The funny thing for myself is I personally don’t use a budget in that sense. Instead, I keep myself constantly in tune with how much I have and how much I am spending. With that it becomes like a challenge of sort where if I am going to take money out of an account then I always ask myself how fast can I replenish it without it harming the ability for the funds to grow. It really makes me think of my purchases and the future.

For example, I know a lot of people would think having zero dollars and no debt is the safe zone. However, to me for example $10,000 would be like a safe zone and it makes me want to at least maintain that number and make it go up. I guess another way to think about it is it’s kind of like food and your health. Some people would say you have to follow a strict diet plan if you want to keep the pounds under control and others would say you just need to be constantly knowledgeable and aware of what you are putting in your body. For me, being aware is more of my preference personally as with that it’s a lifestyle habit and not say a one time thing.

I have often heard the argument that going with being more aware route must be stressing as each day you are worrying about what to buy. It’s really not the case, for me anyways. It’s almost like my mind is accustomed to quickly going through an algorithm where I look at the product, the price, I start thinking about value such as if the item has ever gone cheaper, think about any goals I have in the future and whether or not this item will help me, etc. If it passes all these quick flash tests then I can start seriously thinking if I should spend the money.

To me it is no real difference than say people who wouldn’t eat a piece of fruit because it smells bad or has bruises all over. Basically, it’s not like you stand there for hours debating if you think it will be good for you or not. Instead, you have naturally learned that those are potential signs that the product isn’t that good and that putting it in your body can mean bad things later. In my opinion, having this same approach with money is the way to go in my view.