Should you “simplify your finances”? No, just gain control & understand your finances

Truth is something which can’t be told in a few words. Those who simplify the universe only reduce the expansion of its meaning. 

-Anais Nin

After reading a recent article
in Kiplinger’s Finance Magazine
on
simplifying your finances, I wondered if your personal finances can really be
made simple.  Sure, many of us hope
so ….

But, I am not sure that “simple” is best.

 

However, gaining control of
your finances and a better understanding does make sense.

Here are some ways that help
you gain control that may also “simplify” your life:

Cash management and Debt
management

Set up automatic payments with
vendors so they use your bank or credit card, or set up payments using your
bank website.

·       If the payments are regular, and of similar amounts, you save
time and can plan on the withdrawals.

·      
However, if you change banks, sorting and resetting auto-pay at
the new bank can be a major headache. Similarly, if you change credit cards,
you need to update information with all vendors.

You can also automate tracking
of your spending by using websites like Mint or Personalcapital.  Or, you can use Quicken or QuickBooks
software from Intuit to track your bank and credit card accounts.  You can download from your bank and credit
card websites into the program and then review to analyze your cash flow and
spending.

Setting up direct deposit for
payroll into your checking is great.  You can also split part so it goes
to savings or even have some go to your investment accounts.  You will
then need to follow up to invest the cash that accumulates, but having money
set aside saves it from being spent, and adds to your investments

Investing

Kiplinger’s recommended
consolidating retirement accounts to avoid low balance fees.  It also
makes updating beneficiary designations easier.

While avoiding fees makes
sense, am not sure that putting all investments into a single retirement
account does.  You cannot do this if you have Roth and pre-tax accounts
like a 401(k) plan, and you probably should not do it if you have contributory
IRA and 401(k) accounts that are subject to different tax rules.

Kiplinger’s also recommended
using one broker for your taxable accounts.  This makes more sense, in
that you have a higher balance which should mean lower fees and more attention
from the broker.  However, I prefer using exchange traded funds, or ETFs,
and avoiding most broker fees, which means essentially no attention from a
broker.

One article said that your
investment plan should be to “sign up and forget it.”  While avoiding
investment pitfalls like second-guessing yourself out of panic when a fund goes
down is good, I do think you need to review and rebalance your investments once
a year.

Another article recommended
using an “all in one” fund for investing.  Now, this really troubles
me.  If your sole goal is retirement, then an age-targeted fund could make
sense.  But, if you are saving for goals with different time horizons,
this is a bad idea.

If you use an age-targeted
fund, do your homework on the funds.  For example, if the fund plans to
suddenly shift to bonds when you retire, that will not serve you well because
you are likely to have several decades for which you will need the growth from
stocks.

Protecting your information

Having a master password for
access to all your other passwords reminds me of the joke about the student who
repeatedly distilled his notes down, first to an outline, then to note cards,
and finally to one word.  How did he do on the day of the exam?  He
forgot the word.

Nonetheless, having passwords
is clearly important so having a way to manage them is as well.  Check out this recent review of apps for
managing your passwords PC Magazine Best Password
Managers for 2015
.
 You can manage the passwords yourself by
creating a document that you save as a PDF and then encrypt.  But don’t forget the password you used for
the PDF!

Store files in one place

We did a post on using cloud
storage when you do not need originals.  Here is another site to check
out:  Shoeboxed

Credit cards

In addition to downloading
transactions as noted above, you can track your credit score and credit history
by using sites like Credit Karma

Estate planning

For insurance purposes, and for
your estate plan, having a record of possessions, you can list all your
property using sites like Know your stuff home inventory.

Conclusion? Too simple may be a bad result

Setting simplification as your primary goal risks distorting your finances. There are ways to gain better
understanding of your finances that also make your finances simpler.  

Use our website to improve your
financial literacy and if you get stuck, ask us questions!

Guidelines for Holiday Tips and Gifts

I never wanted Mary Poppins to be my nanny. I wanted to be her when I grew up. 

-Anita Diament

The holiday season is in full swing and with that comes gift giving and tipping!  

 

While gift giving
etiquette may be obvious in some instances, it can get less clear when considering
gifts for people outside of your friends and family.  So, to help you navigate the season, we have
put together a guide of suggested amounts for gifts and tips.  

We all have people in our lives that help us keep our
families, homes and businesses on track and get through each day as we move
forward throughout the year.  In many
cases, the services they provide ensure we can go to work, have clean homes and
stay fit, including caregivers, delivery, home maintenance, and personal care
services: 

Caregivers (for kids,
parents and pets, too!)

Caregivers for your children, parents and pets can be
lifesavers.  They provide care,
education, exercise, and attention to those you care about most.  This is the time of year to let them know how
thankful you are for all that they do.  The
amount of service they provide and the arrangement you have with them can
dictate the appropriate gift level:

1.    
Nanny/au pair – a week’s salary and a small
gift;

2.    
Daycare teachers – a $25-$70 gift;

3.    
Home healthcare worker – a week to a month’s
salary;

4.    
Teacher – a small gift and a handmade card from
your child;

5.    
Dog walker – depending on your walker’s
schedule, you may want to gift a day’s pay or a full week’s pay; and

6.    
Dog groomer – half the cost to the full amount
for the service.

If you contract any of these
services through an agency, you may want to contact the agency to find out if
they have a gift-giving policy in effect. 
If the agency prohibits gifts, consider alternatives like making a
donation to the agency or sending in homemade cookies to the office. Or sneak a Starbucks card into their stocking …

“Neither snow nor
rain…”

Despite the weather, terrain or traffic, your mail carrier
delivers your mail every day and your online purchases arrive on time and in good
condition.  Let those who make those
deliveries know you’re grateful.  In
deciding what and how much to give, consider the particular company’s gift
giving restrictions:

1.    
Mail carriers – are not prohibited from
receiving cash gifts and gifts more than $20;

2.    
FedEx – employees may accept gifts under $75,  though no cash or gift cards;

3.    
UPS – workers are allowed to accept tips, but
UPS discourages the practice; and

4.    
Newspaper delivery – $10-$30 is standard. 

Home Maintenance:

Whether
you live in a single family home or a large apartment building, it’s likely
there is someone who services your home or property in some way. 

1.    
Trash and recycling collectors – $10-$30, which you
may want to mail directly to the collection company if you’re not home to hand deliver
it;

2.    
Doorman – $25-$100;

3.    
Regular cleaning person – the cost of one visit;

4.    
Landscapers/gardeners – $20-$50 per person or if
you have just one person doing the work, the cost of one visit;

5.    
Parking garage attendant – $10-$50; and

6.    
Building’s handyman, superintendent and
custodian – $20-$100.

If
you have someone who always goes the extra mile, such as a handyman who’s
prompt and efficient or a doorman who is quick to carry heavy packages for you,
then a larger tip may be warranted. 

Personal Services:

It’s
hard work keeping you fit, perfectly coiffed and beautiful, but recognizing the
efforts of those who do is easy and may also buy you scheduling flexibility
when you really need it.  In deciding
whether to tip and how much, consider this:

1.    
Hairdresser/manicurist – if you’re a frequent
visitor, tip the cost of one visit.  If
you’re a less frequent customer, then $20. 
However, if you tip generously through the year, you do not need to give
an extra tip at the end of the year;

2.    
Personal trainer – up to the cost of one  cost;

3.    
Massage therapist – also cost of one visit; and

4.    
Golf or tennis instructor or sax teacher – a thoughtful gift.

If you’re unable to tip or give a gift, a thoughtful thank
you note will acknowledge the good work these people do for you throughout the
year.  Another effective gesture of
gratitude is to send a thank you note to the supervisors of the people who
provide you with great service throughout the year, letting them know how
impressed you are with the service you receive.  

Good feedback is appreciated by both the
supervisor

and the people who are helping you out. 

Make Customer Service Calls Work for You

Southwest Airlines is successful because the company understands it’s a customer service company. It also happens to be an airline. 

-Harvey Mackay

Afraid to make a call to customer service? 

 

Years ago, I read a compelling account of success in handling customer service issues and was transformed from the angry guy making threats to the customer rep’s new best friend.  My new attitude brought great results, like the time I dialed up Verizon Wireless about a malfunctioning cell phone (one I accidentally put through the wash cycle), they effectively paid me (via a dollar refund and free headsets) to replace it. 

Want to use this same magic? Here is how:

1.     Be Respectful:  Make them feel important and validated.  Ask them their name, if they did not give it, and use that in the conversation. 

2.     Show Gratitude: Thank them for what they’re doing. If they feel you appreciate their efforts, they’ll work harder for you.

3.     Recruit Them:  Use terms like “we” and clearly state your objective so you can turn the call into a mission, with the representative committed to helping you accomplish it. 

4.     Remain Calm:  Avoid trigger words, anger and any swearing.  Otherwise you risk losing the bond you created.  Maintain the position of being empowered to get what you, as the customer, deserve. 

5.     Communicate Your Determination:  Be clear that you are not going anywhere until your mission is accomplished.  Be clear that you are not taking any brush off.

6.     Escalate:  If you are not making progress, then escalate: ask to speak to a manager.  Many representatives are judged by the number of calls referred to managers or supervisors, so asking may prompt them to be more helpful.  

This approach takes practice (and patience).  

However, it is quite effective, so you are likely to see good results. Good luck!

Sermons, partying, hangovers, diets, …. and financial planning

One day I woke up with an atrocious hangover, and it hurt so badly that I told myself, ‘It’s time to stop. I can’t do it anymore. It’s not good. It hurts too much.’ 

-Jordan Knight

Okay, bizarre title, but bear with me:

Financial
planners often feel as if they preach sermons to encourage needed
planning. 

And like most “you should be doing
this!” sermons, their preaching is met with serious resistance. 

 

So here’s a different approach: 

In college, you must have had at least one morning where you
woke up with cobwebs in your head, regretting all the partying you did the
night before.  Not only did you feel
sick, you couldn’t believe how you acted or worse, had no recollection.  And to make all this worse, your bank account
is overdrawn and you maxed out your credit card.

It’s not that you didn’t know better.  Of course you did.  But you told yourself, “hey, I’m young, now’s
my time to live!” 

Okay, now imagine that we are
talking about you waking up at age 60, after several decades of living it up,
with more than cobwebs in your head and an empty wallet:  you don’t have enough to retire.  In fact, you have to work much longer than
you ever hoped. 

You spent decades eating out, entertaining,
going on costly vacations, buying expensive clothes and such instead of saving
what you needed.  Unlike partying in your
20s, where you can catch up on by being frugal later, at age 60 you can’t catch
up and you don’t get to go back a few decades to make up what you needed.  

Just as you know better than
to party all the time, you know that you should be planning for retirement,
even if it is many decades away.  At the
same time, you don’t need to sacrifice everything today for the future. 

What you do need to do is find
a balance in your spending and saving. 
And that is where planning comes in.

Here’s one example: managing
your cash flow:

Preparing a budget requires
some serious work and isn’t that fun. 
You need to review 12 months or more of spending, analyze it and then use
it to project and inform future spending.  You will see where every dollar came in and
went out.  That can enable you to shift
where some dollars go, so you save more for future goals. 

Preparing a budget is
unpleasant and having the discipline to follow it is challenging.  But, like following a diet to lose weight,
your financial health will improve.  If your
doctor says your health depends on a diet, you follow it. 

So now, when a financial planner tells you
that your future financial health requires action now, will you take that seriously?  

I hope so. 

Green Investing for your IRA

We need to invest dramatically in green energy,
making solar panels so cheap that everybody wants them. Nobody wanted to buy a
computer in 1950, but once they got cheap, everyone bought them. 

 -Bjorn Lomborg

While there is no “green IRA”, you can pick a
mutual fund, such as the ones mentioned above, or select stocks yourself in
within your IRA or Roth IRA (see
To Roth or Not to Roth).  That is, when you contribute cash to
your IRA, it sits in a money market account, doing little until you invest it. 

 

For an increasing number of investors, “doing good” with their
investments is as important as doing well.

Tapping into this new environmentally
conscious market, more not-for-profit organizations are teaming up with money
managers to create a new line of impact investments.  Here are some examples: 

Green
Century Funds
;

Aquinas Funds; and

Calvert

Caution:  before you pick any, use a resource to
evaluate and compare, such as Kiplinger’s
Finance

Here are the steps to
invest in environmentally conscious companies:

 1.     Select type of IRA:  Before opening and IRA, decide whether a
Roth IRA or a traditional IRA suits your needs (see the Financial Literacy post). 

2.     Open
an IRA
:  Opening an IRA has never been easier.  You can contact a financial
institution, by phone or online, that offers IRAs, usually a bank, brokerage or
mutual fund company.  Do your research
and be sure the broker offers a self-directed IRA, so you can pick your
investment options.  Also, be mindful of
fees charged for trades, that is the buying and selling of stocks or funds.  You want a discount broker.  Finally, name beneficiaries in case something
happens to you. 

3.     Choose
your Investments: 
Your IRA can be made of stocks, mutual funds
or a mixture.  In choosing stocks,
experts such as Jennifer Schonberger of The Motley Fool, suggest that
you focus on particular countries as you make green stock or mutual fund
selections for your IRA.  She notes that China
is an innovator in green technology, though it is also known as one of the
world’s biggest polluters.

4.     Fund
your Account:
  Make a plan to fund your account and stick to
it!   Starting early and contributing
regularly can have an enormous impact your account’s value due to tax-free compounding
of returns (see “Save 10% of
Income
”).

As with any stock market investing, your Green IRA may show you a roller
coaster ride of value swings; however, if you have a long-term horizon, the
significant growth potential should out-weigh this volatility risk.  Also, if you pick a loser, you can always
sell your investment (tax-free) and invest in another.  Good luck!

 

Why You Don’t Need a Budget

Manage your spending by
creating and sticking to a budget.

-Alexa Von Tobel

Traditional Budgets Don’t Work

You know you need to save more, but how? Where will the money come from? It takes tremendous effort to accurately record all transactions so that you have a valid budget.  Then, frequently, after

 

“Instant budget”

A much easier way to figure out your spending is to take a twelve-month period and look at your cash and credit card balances at the beginning and compare them to the end of the year. Look for any inflows from gifts or other non-salary items, and then measure the change.  Did the cash accounts go up or did the credit cards go up?  That is your savings/dis-savings for that year.                  

Changing behavior

Rather than doing a budget to adjust behavior, force a change.  You can do that by removing money from your discretionary spending by contributing the maximum to a 401(k) plan, by an auto debit that put funds into an investment account, and other auto payments you remove available cash from the equation.  If your credit card balances go up, then you have to make a decision to alter behavior.

How does cash flow relate to debts?  

Managing your debt means getting the lowest after-tax interest rate so that you pay as much principle with each payment to pay off the loan as quickly as possible. 

You can deduct the interest paid on a mortgage and an equity line of credit debt.   You can deduct up to $2,500 of student loan debt.  But you cannot deduct the interest on most other forms of debt.

Conclusion?

Yes, you can skip the budget, but don’t skip knowing where all your money goes so that you can save! Remember, every dollar has a job.

The Seven Deadly Sins of investing

All the seven deadly sins are man’s true nature. To be greedy. To be hateful. To have lust. Of course, you have to control them, but if you’re made to feel guilty for being human, then you’re going to be trapped in a never-ending sin-and-repent cycle that you can’t escape from. 

-Marilyn Manson

The single most important risk to a portfolio of investments is a poorly defined or constantly changing strategy.  You must have a long-term approach to which you adhere over time regardless of the current favor of the particular strategy.  You will need to resist the psychological pressures of investing.

 

                                       (I said resist, not sleep through it!)

Avoid These :  

Gluttony – hoarding cash when you should invest or evaluating by only one category when you should look at the big picture; 

Greed – looking for big winnings when time and patience pay off; 

Pride – not selling your losers or those old, familiar holdings when a new idea is better; 

Lust – listening to the information barrage and adjusting your portfolio constantly rather than filtering it out to stick with a plan; 

Envy – chasing fads or looking at a friend who has “winners”, making investing look more like gambling, when actually you should sell your best and buy trailing but good positions (as in the “Dogs of the Dow” technique); 

Anger – not forgiving yourself for mistakes and moving on; and

Sloth (not our friend up above) – changing beliefs to fit your decisions or portfolio rather than reviewing a portfolio intellectually and objectively to decide if you would still buy the holdings today.

You should review your portfolio about once a year. Any more than that and you’re falling victim to one of the aforementioned sins. When reviewing you should re-balance – taking from investments that did well and adding to investments that did not perform as well since the last re-balancing.  This reallocating may seem wrong, especially when bond yields are low and CD rates are low.  Nonetheless, history tells us to override the psychological urge to keep investing in a “winner.” 

Individual investors are a “negative indicator” because they buy when an investment is near its peak and sell when it is near its bottom, exactly the opposite of buy low, sell high.  So you want to take “profits” from those currently doing well, and re-deploy them with assets that are more likely to provide future returns. 

Adhering to a sensible investment strategy is how money is made over time.  

You may feel that you missed out compared to someone who is all in the right stocks now.  However, you will also be glad to miss out when that person’s holdings go down faster than the market.

      

Real Estate: A Money Making Illusion

Many novice real estate
investors soon quit the profession and invest in a well-diversified portfolio
of bonds. That’s because, when you invest in real estate, you often see a side
of humanity that stocks, bonds, mutual funds, and saving money shelter you
from.

-Robert Kiyosaki

Proper diversification of your investments may include real property. However, purchasing and managing rental property isn’t for everyone. Most people are better off diversifying by purchasing REITs (real estate investment trusts) using a mutual fund or an ETF (exchange-traded fund).

Unfortunately, most real estate success stories are either not true or fail to factor in all costs. 

Remember Florida like 15 years ago? Prices were climbing on a monthly, if not weekly basis. However, to achieve good returns, you had to buy well (not pay too much), sell well (not be left holding property after the frothy market collapsed), and cover your costs. Quick flips are taxed at ordinary rates, so having an after-tax profit means selling at a price that covers all you paid to purchase, hold until sale (mortgage interest, property taxes, maintenance), and the costs of sale (usually more than 5% of the gross), plus taxes on the profit – usually 25% or more.

 

But just investing in REITs is so boring ….

If you are serious about buying and managing rental properties, then you have made a decision to go to the business of being an owner/landlord. 

Steps you need to take

Before you can hang out with Kar Po Law, John Sobrato and Hawken Xiu Li, take these steps:

1.      This is a real business!

Almost everyone has heard a story about people becoming wealthy investing in real estate. However, the stories of true wealth accumulation involve people who dedicated substantial time to running a business investing in real estate.  Just to be clear, claiming you need a massive profit on the sale of your home is neither investing in real estate nor a true profit. Your residence is part of your cost of living.  So, before you claim that you profited on the property, you need to factor in all the costs of insuring, maintaining, repairing and improving that residence before sale, as well as the actual costs of sale. Rarely does the net return on a personal residence equal the stock market return over the same period.

2.      Do some research! 

For rental real estate, you will need to do your homework just like any other business to determine what is a good market. That is, find out where property values allow you to buy low enough that you can get a good return on your purchase.  Part of your return will come from property appreciation.  If the market changes and property values decline, you have lost capital.  You want to know what segment of the population is likely to rent from you for a given property and the likelihood of vacancies or late payments.  This is sometimes called a market study.  You should anticipate some level of vacancy (times when you don’t get collect 100% of the possible rent).  Furthermore, you will want to factor in, and anticipate, the cost for advertising, professional fees (legal and accounting), repairs, supplies, landscaping, snow removal, and so on.  Finally, at some point, there will be capital improvements, including anything from a new roof to upgrading electrical systems or changing some part of the internal or external structure.  If your anticipated rental income, less an allowance from vacancies, is sufficient to cover the debt service plus all projected expenses, then you should be in good shape.

3.      Avoid too much leverage (mortgage financing) 

When you have decided on the property, expect to use mortgage financing.  This allows you to buy more property. You are counting on rental income to pay the mortgage principal, interest, property taxes and insurance.  However, if you put very little down, your payments might be quite high, make it less likely that will cover all those expenses (you may need to put in more and use less mortgage financing).  A downturn in property values when you must sell will mean that you must bring money to the closing – a bad thing! A change in the local economy, so that you lose tenants, could result in negative cash flow, which means you are effectively adding capital to the property – also bad.

4.      Form the proper entity to own 

Before you buy, you may want to form an entity – an LLC, corporation or trust.  The entity protects your personal assets, because anyone who tries to sue you as the owner can only claim against the value of the property and other assets of the entity.

5.      Set up all the systems you will need:

Bookkeeping – be sure you know how to treat security deposits, both so the money is not income to and so you meet requirements of local laws.

Legal – form of entity, rental agreements, local law, zoning … you are going to want help!

Tax prep – be sure you know what you can deduct vs. depreciate and so on;

Maintenance – expect to spend time and money on this, or else tenants won’t pay rent on time and may leave; and

The rest– Fire, police, zoning and other contacts.  You may want some form of record keeping for all this, such as rent rolls.

As with our recommendations for starting your own business, setting up proper bookkeeping and getting legal advice at the outset is crucial. See 7 Things to do When Starting a Business.

6.      Put your agreement with partners in writing 

If you join with someone, you will want an agreement that makes clear who does what, in terms of funding and time spent. Otherwise, you could end up in an unpleasant disagreement or worse.

7.      Don’t stay too long at the party

 In the example of Florida mentioned above, many people jumped in too late, which helped push up prices for others until the market crashed.  Many people were left stuck with properties valued at less than their mortgages in the mortgages bust of 2008 and took many years to finally sell.

The flip side of buying well is to recognize when the property so overvalued and sell. If you gauge this well, and if the market later declines in value, you get to redeploy your capital and start over!

So much keep in mind!

True, but you are now more prepared to be a landlord of the future.  Good luck!

 

 

Don’t Worry About Your Student Loan Debt

Too many young people graduate laden with debts that take years, if not decades, to pay off. 

-Robert Reich

Posts recommending “paying off student loans” do not present a plan.  

Paying off debt may be part of a plan, but it is not a complete plan.  Would you tell me that your favorite sports team won on defense alone, not needing any offense?  I didn’t think so. 

 

Being debt-free is a very short-term, near-sighted plan.  

You might want to retain debts with low after-tax interest rates to invest more excess cash flow.  If you have a mortgage with an interest rate of 4% and earn an annualized 7% on retirement investments, you should not be accelerating the payoff of that mortgage.  Doing so is giving up the 7% return in favor of the 4% return, which clearly is not wise. 

Similarly, budgeting or other means by which you reduce spending now to increase savings may be good – or it may involve living foolishly frugal.  Deciding which depends on your overall long-term goals.

Merely reducing spending to increase cash reserves does not mean you are necessarily better off.  It means you are frugal, have a lower standard of living and have cash in the bank.  If it makes you happy, I just hope it makes you equally as happy 10, 20, and 30 or more years from now. 

The same goes for blog posts on the need to create an emergency fund.  Stashing away cash that earns less than the rate of inflation, on an after-tax basis, is rarely prudent. 

If you planned well and bought a home, you may have enough equity in your home to set up an equity line of credit.  You will just need a plan to pay off any debt if you draw on the equity line. 

Alternatively, there are many emergencies for which insurance is far more effective than amassing cash.  You don’t amass cash for the possibility of having a catastrophic illness or the risk of being sued as a homeowner, do you? 

With a complete plan, you’ll be far better off than “debt-free” and “emergency fund” bloggers. 

The point is that a comprehensive financial plan uses ALL tools, cash management, debt management and more to provide a reasonable quality of life now and for the future.

Play the Rewards Game

Procrastination is like a credit card: it’s a lot of fun until you get the bill. 

-Christopher Parker

 

Channel Lucille Ball here and rack up those points with the following tips to maximizing rewards: 

1. Reward types: Before you begin your search, determine the type of reward you are looking for: cash back, travel, gift cards, etc. Once you know what you are looking for, begin your search for the best card for each type of reward.

2. Strategy: After you review available cards and select one or more for the rewards you want, develop a strategy to use your cards to get the most out of their reward terms. You may find that some cards offer different rewards for different types of purchases. 

3. Fees: You want to avoid paying any late fees, which average $34, because these fees quickly undermine any rewards you may earn. On the other hand, annual fees may be worth paying depending on the rewards being offered. For example, if you earn 6% back on purchases, then a $75 annual fee may make sense. You can always call the company and try to have the fee waived. If you signing up just for the sign-up bonus, then you will probably want to cancel the card before the fee is incurred.

4. Apply: Once you have narrowed down the cards with the best offers for you, apply for the credit cards within a two day period to minimize the number of inquiries recorded on your credit report. Multiple inquiries may damage your credit score.

5. Tracking: Develop a method to ensure you are using the right card for the right purchases.

6. Card balances: Keep your credit usage to 20% to 30% of your available credit because your credit score is also affected by the amount of credit you use. 

7. Payments: Pay off your balance every month. If you allow yourself to carry a balance, the interest rates you incur will diminish or wipe out any rewards you earned.

With a small investment of time and some self control, you can make credit cards pay you, rather than paying them a ton of money in interest.