When NOT to Use Credit Cards

Credit cards can actually be of great use in our wealth-building journey; if we use them correctly. However, before we can effectively use credit cards, we need to establish control of our finances and create passive income.

Typical use of credit cards. In America, the common use of credit cards is buying liabilities that we cannot afford. I like to call this toxic consumerism. We need to understand and defeat harmful consumerism before getting maximum positive benefit from our credit cards. 

What creates toxic consumerism? In a word, advertising. The media constantly bombards us with advertising. We may not even know that someone is trying to sell us something; yet, our brains remember the words or pictures.

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The best way to understand the effects of advertising is to read a book about the subject. I recommend “Cashvertising” because it is straightforward and accurate. The book talks about different topics such as Maslow’s Hierarchy of Needs and scarcity tactics. 

Once you grasp who is advertising to you, you stand a better chance of controlling your spending habits. Indeed, getting out of debt can be even more challenging to navigate when you have access to credit cards. 

Getting out of debt. I like my four-step approach to getting out of debt. I wrote about it in “4 Steps to Become Rich (book).”

1. Pay down debt
2. Lower expenses
3. Create multiple streams of income
4. Invest in assets

I love these steps because relying solely on your earned income job to pay debts can be troublesome. I will lay out the typical scenario that happens when you attempt to pay off debt without creating new income streams.

Example. Let’s say you have $10,000 in consumer debt that you have a strict plan to repay in 10 months. You have timed the payoff by allocating $1,000/mo for ten months. Everything is going fine until your car has some issues.

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The car maintenance costs $2,000, which sets you back by two months. You re-adjust your calendar and press forward. However, your parents want to come for Christmas, costing you $1,000. 

You keep playing this tug-of-war for two years, and you finally pay off your card. You begin to put in a savings account with the money you have been using to repay your debt. You reach +$11,000 in your high yield savings account—something to be very proud of indeed. 

After three years of paying debt and investing, you decide to buy some new furniture and take the family on vacation. Now, you are down to $3,000 in your account but still debt-free.

Now, for the scary part. You’ll have to work another year to get back to +$11,000 in your savings account. Eventually, you’ll be too old to work to replenish your reserves.

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Learn how to create money. The most crucial part of using credit, leverage, taxes, debt, etc., is understanding how to make money. Once you learn that you can create money out of thin air and even print your own, you have completed the circle of finance. 

The book “Unfair Advantage” is an excellent book on creating passive income. There are too many ways to make income to list in this article, but I’ll review a few.

I am currently writing this article on Google Docs. I will then publish this post to my blog to receive advertising revenue.  I will also repurpose this article into a pdf book that could also host advertisements. Finally, I will publish this book to the Amazon Kindle platform, where another set of eyes can pay $3 to read it. 

It cost me nothing to write and publish this book, yet I am creating multiple income streams from my writing. That means I am printing my own money. We also call this an infinite return. You can achieve similar results by renting a room in your primary residence and using your car as a rental car business. 

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Why create your own money? Do not use a credit card if you do not have multiple streams of income. Do not use a credit card if your earned income job is your only source of income. 

The chances of you getting behind in payments is too great. If your only solution is to work more hours to pay the debt, then you have already lost. Exchanging time for money to repay debts may be the worst situation imaginable. 

I wrote an article titled “Why You Need a Job” that explains why we work jobs. Jobs are a great place to learn our profession and to allow us to pay expenses while we build our empire on the side. 

Credit cards can be hazardous to our ability to create income streams. Being under the influence of debt can lead us to make huge mistakes in our personal lives and investing choices. 

Suppose you are in debt currently; no worries. In his book “I Will Teach You to be Rich,” Ramit Sethi says it’s best to figure out your debt-payoff day. I agree. Figure out your debt-payoff day, even if it is five years away.

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Next, learn about passive income. You need to create money to expedite your payoff date. I promise you can pay off debt quickly when you change your mindset. 

Using credit cards. Again, don’t use credit cards until you understand building your own income streams. From there, we have multiple uses of credit cards to make our lives easier. 

However, I will get to those in part two of this article series. I want to cover the positive uses of credit cards more in-depth. I have three positive benefits for credit cards; an emergency fund, cash flow, and rewards. 

While you wait for the next article in the series, you have some homework. Round up all of your debts and write them down. Do a rough estimate of when you could potentially pay everything off ultimately. 

Next, look over my article “21 Passive Income Ideas.” Which of these interests you? You may have to tweak it to your personality, but you need to start thinking of increasing your income. That’s the best way to achieve stress freedom. Until next time—I’m signing off. 

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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it.  I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing