One of the first steps towards financial prosperity is to eliminate debt. Everybody knows that. Over the past few years, we’ve gone through a cycle of maxing out our credit cards, and then paying them off. It just doesn’t make sense. Why keep doing that?
There’s nothing better than the feeling of making the last payment and zeroing out a credit card. But then something happens and you think, “OK, I’ll use it just this once”. Then something else comes up and you think, “Well, there’s already a balance on it so I might as well use it.” And then before you know it, you’ve maxed out your card that you worked so hard to get rid of.
The solution?
It comes in two parts. The first part is to move to a cash only system. If you don’t have the cash for it (whatever it is), don’t buy it! This may seem hard to the people that are just barely getting by and count on their cards just to buy groceries. But when you do the math and add up the interest charges, you’re really losing money big time.
The second part is to cut up those cards. Cut them up! “But wait!” you say. “Can’t I at least keep one just in case of emergencies?” No! We got a tip from Suze Orman who said to keep a cash reserve for emergencies instead. Take a little each month (even if it’s just $10) and stash it somewhere for the possible emergency.
But what about my frequent flyer points?
It’s true that some cards reward you for using them by giving you points for airlines miles, goods and services, and even cash back. The only way this really works however is if you have the discipline to pay off your card every month. That way you never pay a dime in interest charges and you really are part of the 2% that get to take advantage of the system instead of the system taking advantage of you.
As part of our little experiment in going mobile, living our dreams, and inspiring others to do the same, we decided to cut up all of our credit cards.
So we made a little video when we cut up our cards. Check it out below.
Have the faith. Move to cash. And cut up those cards!
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