LWM

Lose the Credit Cards:

Yes that is what I said, but I don’t mean to actually lose them. This is hard to do but trust me it will work, you need to take your credit cards TODAY and cut them up. You do not NEED credit cards to survive in life, in fact your current financial situation could very well have been avoided if you had never signed up for those cards to begin with. We seem to purchase things we do not need or cannot afford when we can put the purchase on credit instead of paying for things with cash.

With the envelope system you do not buy anything you do not have the money set aside to buy, that means if you want a new rear bumper for your Jeep you have to save up the money first and then you can buy it. This is the hardest thing to get used to doing but you will see your credit card balance drop when you stop adding new things to the account.

I have my debit card and I will sometimes use it for things that are in my budget and then make adjustments to my envelopes later (to be discussed in the very near future) but I no longer carry ANY credit cards.

You should cut the credit cards up and call the credit card company today to close your account, in fact you could stop reading this and go do it right now (the credit card phone number is on the back of your credit card) but I am sure if you are like me you need a little more convincing. Let’s do it this way… Take the credit cards out of your wallet now and put them in a safe place (maybe with your envelopes), tell yourself that you are no longer going to use them and let’s just see if I can convince you in the meantime that you really do not need them and we will cut them up later.

You do not need a zero balance to close the account, you can call and close the account at any time and as long as you do not make any new purchases your account will close when you hit a zero balance, I did this on two of my three credit card accounts. When you do finally call to close the account cut up the card so that you cannot use it again.

The third credit card account is a special situation that I will talk about now. It was recommended that I cut up all of my credit cards but as a professional businessman (with a company credit card) I know there are times when you may need one and I pride myself on being prepared (a Boy Scout thing).

I have a credit card that I had the maximum limit LOWERED to $2,500 and this is my “Traveling Emergency Fund”, in other words this credit card stays at home in the safe unless I am traveling away from home (extended out of town trips) where I may not be able to access my emergency fund. For example if I take a road trip to Camp Commander I will take the credit card as I will have no access to my credit union or my envelopes, if the Jeep breaks down and I have to make an emergency repair I can use the credit card and then pay off the TOTAL balance when I get home and get to the credit union for my cash.

Another time I needed my credit card was when I went to SEMA last year and needed a credit card in order to check in to the hotel, you can use your debit card but when you do that the hotel locks the room charges and those funds are not available to you if you need them for other things. By using your credit card you tie up none of your money and when you do not put the charges on the card (you should pay the actual room charges in cash while you are there) you still have a zero balance. You could leave the room charges on the credit card and pay in full when the bill comes but that leads to bad habits and I suggest you just pay cash for everything from now on.

More on cash in the next blog.

Feel free to send me a PM if you have questions or you can add them to the comments section if you feel others can benefit from the discussion.