In addition to empowering parents and students to win with money; I like to share my personal financial journeys as well. I share my initial fears of investing and how I paid off Debt Before the Age of 30, pretty regularly.
Now, I want to address a common question that I get asked…Do you still use credit cards after paying off all of your debt? The answer is YES, despite studies showing that people spend more when swiping than using actual cash. My reasoning? I want to maximize the generous reward offers for travel! Which was definitely worth it bec Now I am a very disciplined spender, my previous debt was primarily student loans and a car, and I did not just go wild with credit card spending to hit reward point goals.
Managing spending habits is always the first hurdle to any financial success. I have several intense investment goals, so I am on a strict budget. I am the first to tell my friends that I simply cannot afford something. I am often met with blank stares when I say this because I’ve been toting paying off $80k of debt and all of my minimalist ways. So how the heck can I not afford a simple trip…fancy dinner…concert? Simple, money is not budgeted for these expenses and I don’t just SWIPE my credit card to live in a false reality of being able to afford something. I DO NOT encourage people who are drowning in debt to start travel hacking. I was debt free (aside from my mortgage) when I began this journey. I am simply sharing my journey after paying off $80k of debt.
Soooo let me explain the strategies I used to rack up 200k reward points in less than 12-months without breaking my budget:
1.) Budget Tracking
I budget via a combination of multiple bank accounts and the cash envelope system. As such, I split my direct deposit among 4 accounts. One of the accounts is for groceries, entertainment, clothing, toiletries aka disposable income. This allows me to ensure I don’t overspend. If I use my credit card for groceries, I pay it immediately from this account. However, I will say that I rarely use my credit card for every day purchases.
2.) Plan out large expenditures
I signed up for credit cards according to when I knew I had upcoming large expenditures rather they were personal expenses or for my businesses. For example, I pay my auto insurance in full every 6 months. As such, I know that a $1,200 bill could get me halfway to a $3k introductory spending offer. I also take several [budgeted] vacations a year so I book those during a credit cards intro period as well. You may be thinking, aren’t you using the rewards for travel…why are you spending your money for vacations? Everyone needs a starting point to generate points, so I put my planned trips on the card to get the intro points.
3.) Never carry a balance…no interest here
As mentioned above, my direct deposit is split between 4 accounts. One of those accounts is a savings account to pay for planned large expenditures. Therefore, when I use my card for large expenditures I am paying the balance in full when receiving my card statement.
4.) Credit Score Monitoring
Most people who become debt free are not concerned with their credit score because they don’t plan to acquire more debt. I didn’t own a home when I became debt free so I wanted to make sure that I did have a high credit score. I also want to maintain a high credit score for potential equity improvements that may require me to take out a home equity loan. Side note… my primary property is a multi-family unit so this would truly be an investment. I have opened 4 credit cards within a 12-month period and my score has not dipped below 800. This is because I pay my cards in full AFTER receiving my statements and follow other key factors to ensure my score isn’t affected.
Maintaining a high credit score ensured that I would still receive the credit card approvals to meet my reward points goal. What was my reward points goal? I wanted to be able to take my mom to HAWAII for a full week with our flight and hotel expenses covered. Check out Part 1 of how I created a strategy to accumulate reward points!
Be sure to let me of your reward goals!