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5 Credit Card Habits That Will Have Your Credit Cards Printing Money, Instead of Burning It

5 Credit Card Habits That Will Have Your Credit Cards Printing Money, Instead of Burning It

Credit cards can do one of two things. They can earn you tons of value through rewards, points, miles, cash and perks. Or, they can burn a hole through your wallet with fees, penalties and sky high interest rates.

Here are 5 habits that will turn your credit cards into money earning power houses.

1. Free Loans

Did you know there are two ways you can get a bank to lend you money for free? A credit card’s grace period essentially lends you money with no interest from the time you make a purchase to 21 days after you receive your credit card statement. That’s free float that can bridge a short term cash flow issue or allow you to earn interest (although not much nowadays) on the banks dime.

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Another way to squeeze free money out of a bank is through 0% balance transfer credit cards, cash advances and purchase rate promotional periods. Many credit cards offer 0% promotional rate for limited time periods. Take advantage and you can either transfer high interest debt to 0%, or borrow money for a new purchase completely free for 6-12 months and more sometimes.

2. The Golden Rule

Missing credit card payments can jack your rate, trigger late fees and destroy your credit score. The challenge is, no matter how good our intentions are, many of us get distracted and fail to make our payments on time.

There is a fail-safe way to never be late on a credit card payment again. By scheduling automatic monthly payments to your credit card, you’ll have the choice to pay down your entire balance or your minimum monthly payment by the statement due date. You’ll literally never be late again.

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3. Every Dollar Counts

If you’re going to make a purchase you might as well get rewarded for it. Why use cash or debit cards when you get nothing in return. Credit cards are a great way to manufacture significant savings on everyday purchases like gas, grocery, restaurant and pharmacy spend.

Many of the best cash back credit cards now offer opportunities to earn 5% in cash rebates in selected merchant categories. In fact, you can even combine multiple cash back credit cards with bonuses in different categories to maximize your earnings on all your spend.

Whether you’re buying a pack of gum, jeans or booking a cruise, get rewarded for every cent you spend. Not only will you maximize your rewards, you’ll also get the added budgetary benefit of seeing exactly how much you spend and where on your credit card statement.

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4. Welcome the Bonus

Yes, earning rewards from your credit card spend is valuable. But credit card issuers give away the most value in their sign-up bonuses to lure new customers. Think about it! Do you want to spend $50,000 to earn 50,000 points, or simply get a new credit card and earn the 50,000 points? Why do you wait 2-3 years for a free trip when you can get it right away?

The lesson is, loyalty doesn’t pay. Too many people stick to the same credit card year after year. Instead you should get a few new cards with significant welcome bonuses each and every year and watch your rewards multiply exponentially – rinse, wash, repeat. When doing so, just make sure to take note of the credit criteria, minimum income and minimum spend required to get approved for the card and receive the bonus.

5. Get Perky

Not only can credit card perks add comfort and luxury to your travels, they can also save you real dollars.

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Look for cards that offer perks with real cash value, such as free bags at check-in ($25-$35 in savings per bag), free roadside assistance ($65 value per year), free annual companion ticket ($250+ per year), complimentary travel insurance ($400+ per year), free wi-fi ($10 per day), free lounge access ($40 per visit) and free extended warranty coverage ($100+ per year).

Conclusion

Credit cards do have a dark side. But used properly, as they are by millions of people, they can bring lots of value to your pocket. Instead of running scared, embrace the positive, limit the negative and watch your credit card rewards bank bulge with points, miles and cash to spare.

Featured photo credit: Kaiyan / Flickr via flickr.com

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Marc Felgar

Marc Felgar is an aging, health & senior care expert focused on improving the lives of mature adults.

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Last Updated on September 2, 2020

How to Set Financial Goals and Actually Meet Them

How to Set Financial Goals and Actually Meet Them

Personal finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. That’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

In this article, we will explore ways to set financial goals and actually meet them with ease.

4 Steps to Setting Financial Goals

Though setting financial goals might seem to be a daunting task, if one has the will and clarity of thought, it is rather easy. Try using these steps to get you started.

1. Be Clear About the Objectives

Any goal without a clear objective is nothing more than a pipe dream, and this couldn’t be more true for financial matters.

It is often said that savings is nothing but deferred consumption. Therefore, if you are saving today, then you should be crystal clear about what it’s for. It could be anything, including your child’s education, retirement, marriage, that dream vacation, fancy car, etc.

Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives that you foresee in the future and put a value to each.

2. Keep Goals Realistic

It’s good to be an optimistic person but being a Pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going beyond what you can realistically achieve will definitely hurt your chances of making meaningful progress.

It’s important that you keep your goals realistic, as it will help you stay the course and keep you motivated throughout the journey.

3. Account for Inflation

Ronald Reagan once said: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman.” This quote sums up what inflation could do your financial goals.

Therefore, account for inflation[1] whenever you are putting a monetary value to a financial objective that is far into the future.

For example, if one of your financial goal is your son’s college education, which is 15 years from now, then inflation would increase the monetary burden by more than 50% if inflation is a mere 3%. Always account for this to avoid falling short of your goals.

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4. Short Term Vs Long Term

Just like every calorie is not the same, the approach to achieving every financial goal will not be the same. It’s important to bifurcate goals into short-term and long-term.

As a rule of thumb, any financial goal that is due in next 3 years should be termed as a short-term goal. Any longer duration goals are to be classified as long-term goals. This bifurcation of goals into short-term vs long-term will help in choosing the right investment instrument to achieve them.

By now, you should be ready with your list of financial goals. Now, it’s time to go all out and achieve them.

How to Achieve Your Financial Goals

Whenever we talk about chasing any financial goal, it is usually a two-step process:

  • Ensuring healthy savings
  • Making smart investments

You will need to save enough and invest those savings wisely so that they grow over a period of time to help you achieve goals.

Ensuring Healthy Savings

Self-realization is the best form of realization, and unless you decide what your current financial position is, you aren’t heading anywhere.

This is the focal point from where you start your journey of achieving financial goals.

1. Track Expenses

The first and the foremost thing to be done is to track your spending. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you will be surprised by how small expenses add up to a sizable amount.

Also categorize those expenses into different buckets so that you know which bucket is eating most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pumping up your savings rate.

If you’re not sure where to start when tracking expenses, this article may be able to help.

2. Pay Yourself First

Generally, savings come after all the expenses have been taken care of. This is a classic mistake when setting financial goals. We pay ourselves last!

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Ideally, this should be planned upside down. We should be paying ourselves first and then to the world, i.e. we should be taking out the planned saving amount first and manage all the expenses from the rest.

The best way to actually implement this is to put the savings on automatic mode, i.e. money flowing automatically into different financial instruments (mutual funds, retirement accounts, etc) every month.

Taking the automatic route will help release some control and compel us to manage what’s left, increasing the savings rate.

3. Make a Plan and Vow to Stick With It

Learning to create a budget is the best way to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be organized

Nowadays, several money management apps can help you do this automatically.

At first, you may not be able to stick to your plans completely, but don’t let that become a reason why you stop budgeting entirely.

Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options, and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

4. Make Savings a Habit and Not a Goal

In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that, in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

Make savings a habit rather than a goal. While it might seem to be counterintuitive to many, there are some deft ways of doing it. For example:

  • Always eat out (if at all) during weekdays rather than weekends. Weekends are more expensive.
  • If you are a travel buff, try to travel during off-season. You’ll spend significantly less.
  • If you go shopping, always look out for coupons and see where can you get the best deal.

The key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice, which will be harder to sustain over a period of time.

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5. Talk About It

Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission.

Therefore, in order to stay the course, surround yourself with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

6. Maintain a Journal

For some people, writing helps a great deal in making sure that they achieve what they plan.

If you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

When you have a written commitment on paper, you are going to feel more energized to follow the plan and stick to it. Moreover, it is going to be a lot easier for you to track your progress.

Making Smart Investments

Savings by themselves don’t take anyone too far. However, savings, when invested wisely, can do wonders.

1. Consult a Financial Advisor

Investment doesn’t come naturally to most of us, so it’s wise to consult a financial advisor.

Talk to him/her about your financial goals and savings, and then seek advice for the best investment instruments to achieve your goals.

2. Choose Your Investment Instrument Wisely

Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about the common ones, like a savings account, Roth IRA, and others.

Just like “no one is born a criminal,” no investment instrument is bad or good. It is the application of that instrument that makes all the difference[2].

As a general rule, for all your short-term financial goals, choose an investment instrument that has debt nature, for example fixed deposits, debt mutual funds, etc. The reason for going for debt instruments is that chances of capital loss is less compared to equity instruments.

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3. Compounding Is the Eighth Wonder

Einstein once remarked about compounding:

“Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.”

Use compound interest when setting financial goals

    Make friends with this wonder kid. The sooner you become friends with it, the quicker you will reach closer to your financial goals.

    Start saving early so that time is on your side to help you bear the fruits of compounding.

    4. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments and taking stock of how our investments are doing.

    If we don’t measure progress at the right times, we are shooting in the dark. We won’t know if our saving rate is appropriate or not, whether the financial advisor is doing a decent job, or whether we are moving closer to our target.

    Measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    Managing your extra money to achieve your short and long-term financial goals

    and live a debt-free life is doable for anyone who is willing to put in the time and effort. Use the tips above to get you started on your path to setting financial goals.

    More Tips on Financial Goals

    Featured photo credit: Micheile Henderson via unsplash.com

    Reference

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