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Why I’ll NEVER Cut Up My Credit Cards

Why I’ll NEVER Cut Up My Credit Cards

    It’s been just over two years since I got my first credit card. I now have three and I’m never looking back. Ah, credit cards. How do I love thee? Let me count the ways:

    ·         Credit cards track my spending. The problem with withdrawing money from an ATM and paying for everything in cash is that you often struggle to remember exactly where your money went. With credit cards, I can review the statements every month and reconcile each line item to my Quicken records to make sure even a few bucks here and there are properly accounted for. I couldn’t do that with cash.

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    ·         Credit cards boost my credit score. As a college graduate with no student loan, no car repayments, and no mortgage, credit cards have helped me ‘get into the system’ and build a strong credit profile. By using them wisely, I’ve already qualified for lower rates that I can take advantage of when I eventually buy a house. If it weren’t for credit cards, I’d pretty much be off the financial grid.

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    ·         Credit cards give me awesome rewards. Each of my credit cards rewards me in a very useful way. One gives me up to 33% off food. Another lets me earn interest on any positive balance at a rate banks would only offer if I locked in a far higher amount for a far longer time. But my favourite is a 90% discount on my monthly membership to an amazing gym. This includes free wireless internet, not to mention unlimited classes like yoga and FUN’k off (don’t ask), for just $7 a month! When’s the last time cash treated you so well?

    At this point, you might be feeling uncomfortable. Heck, you might be downright appalled. But please put down the pitchfork and step away from the comments. Allow me to offer some clarification before you write me off as yet another 25-year old on the road to disaster and destitution:

    ·         I am NOT advocating excess spending. Most people avoid credit cards because they’re too much of a temptation to overspend. Given that the key to wealth is to spend less than you earn, this makes perfect sense. Credit cards should NEVER be used to spend money on things you can’t afford. In other words, NEVER buy on credit what you can’t already buy using cash. Period. I’ve never been a particularly extravagant person, which is why I actually like the fact that I’ve had the same pair of All Stars for about five years. My credit cards are only used for things I can already afford (mostly things I have to buy anyway), which is why the charges only amount to around 25% of my income every month. Nothing gets charged that cannot be paid.

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    ·         I am NOT advocating getting into debt. Another reason people avoid using credit cards is because they fear debt. This makes sense too. Debt. It’s a horrible word that conjures up images of shackles and a burdened life. But not all debt needs to be portrayed so negatively. One of the key things I learned at Rich Dad Coaching (and wrote about in The Beauty of Debt) is the distinction between good debt and bad dad. Good debt, like that used by Robert Kiyosaki to buy investment properties or that used by Bill Bartmann to become one of the 25 richest people in America, puts money in your pocket. Yes, credit card debt is bad debt, but it won’t cost you a cent as long as you ALWAYS pay the balance off in full (and can negotiate waived annual fees). This means your cash can stay in the bank longer (earning interest as it does so) and only be used to pay off the debt when the due date arrives. In some cases, that can be as far as 55 days away. Score!

    ·         I am NOT advocating getting credit cards purely for rewards. Too many people have been tempted by the promise of low rates and other amazing benefits only to find that they were temporary offers at best. Before settling on a card, make sure you do proper research and read the fine print. Since interest rates only matter if you have existing debt that you’re trying to consolidate, you have total freedom to find a card that works for your situation. Your best bet is to find one that rewards you for purchases at stores you already use all the time and/or rewards you with benefits you can actually take advantage of. Perhaps you’ll get lucky and score a free European trip!

    In conclusion, I hope it’s clear that credit cards are not the homewreckers everyone paints them out to be. If you already have a good dose of financial discipline (control your expenses by spending less than you earn) and use them with wise self-control (pay off the FULL balance every single month), they can be a really great part of your overall plan. But if you don’t and won’t, then burn this post immediately (figuratively, of course) and stick to what you know.

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    What do you think? Have any of you had good success with credit cards to help me build my case? Would you share your story in the comments, pretty please?

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    Published on November 20, 2018

    The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

    The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

    The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

    Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

    In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

    Why Your Past Prevents You from Saving Money

    Are you constantly thinking about your financial mistakes?

    If so, these thoughts are holding you back from saving.

    I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

    It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

    For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

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    How to Effortlessly Track Your Spending

    Stop manually tracking your spending.

    Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

    When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

    Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

    The Truth on Why You Keep Failing

    Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

    Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

    Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

    If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

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    Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

    Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

    1. Save more than 50% of your available money (after expenses)
    2. Only buy nice things after saving
    3. Automate your savings with automatic bank transfers

    These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

    How to Foolproof Yourself out of Debt

    Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

    So how can you separate yourself from the 60%?

    By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

    This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

    For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

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    Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

    A Proven Formula to Skyrocket Your Savings

    Having proven systems in place to help you save more is important, but they’re not the best way to save money.

    You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

    What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

    Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

    Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

    During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

    Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

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    Transform Yourself into a Saving Money Machine

    Saving money isn’t complicated but it’s one of the hardest things you’ll do.

    By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

    The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

    Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

    Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

    What are you waiting for? Go and start saving money, the sky is your limit.

    Featured photo credit: rawpixel via unsplash.com

    Reference

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