To be honest, most people will never reach the advanced stage of using credit cards. This is the point where you absolutely hate credit card debt.
People who reach this stage usually have had to crawl their way out from under debt. It’s not fun giving up your short-term future and fun to pay for the past, but it is a necessary journey.
However, advanced credit card users understand that these cards still serve a purpose in their lives, which I will discuss today.
Private School vs. Real Estate
Welcome back to the Using Credit Cards 101 series (Beginners, Intermediates), where we turn credit cards into our friends.
Getting past the debt explosion. As intermediate users, we had to overcome financial adversity between ages 25-45. Unless your parents gifted you with the education and resources, most people get into debt during this phase in life.
We live in a consumer-focused society, so escaping the bombardment of advertising and marketing can be challenging. Many people escape credit card purgatory only to get into other debt.
FIRE Writer: Retire & Write
The allure of your 40s. Once you hit your 40s and 50s, things change. It is akin to going back to high school. The few people who stay married, have jobs and are “adulting well” start to become cool kids.
This is the time in life when you will see fancy travel to overseas locations. You will also see sports cars, motorcycles, jet skis, RVs, and convertibles.
This is the “show-off” stage of life for those who make it. People have been at their jobs for 20 years and are now reaping the rewards of being good employees.
The danger of keeping up with the Joneses. The problem with buying all these toys, going to sporting events, and traveling overseas is that people fail to create a financial cushion.
Saving for a House Down Payment #3
When you are living a high life, things can change suddenly. Preparing for emergencies is not fun, but it’s how you maintain an “uneventful” life.
They don’t plan for the worst while having fun during their midlife crises. When something happens, they turn back to credit cards.
An advanced credit card user is working towards a massive cash emergency fund. You then have the choice to pay for emergencies from your emergency (or maintenance) fund or future cash flow. Let’s look at an example.
A $3,000 emergency. I recently had a $3,000 emergency on my Arizona property—the water pump went out on my (water) well.
I had the cash in my maintenance fund, so I paid from this account. I then used cash flow from the next month to replenish my maintenance fund.
The Magic of Evergreen Content
I used my cash maintenance fund only because I had to transfer money into the property management account, which requires cash.
I’d prefer to have used my credit card to pay this $3,000 expense. I do not like depleting my cash reserves for routine maintenance like this incident.
I’d rather pay it out of future cash flow because I have $3,000 to $4,000 free cash flow every month. It’s easy to pay on my credit card and repay it within 30-60 days.
Rental Properties vs. Rental Rooms
The problem is with low cash flow. Our midlife crisis folks don’t have much free cash flow. Any pay raise or extra income pays off debt from vehicles and trips.
When a $3,000 emergency strikes, they don’t have the emergency fund OR cash flow to cover the expense. Let’s say they have $500/month of free cash flow and put $3,000 on their credit card.
It would take six months of cash flow in a perfect world to pay off this debt. However, as we know, the world isn’t perfect. Compound interest is not only working against them, but other things tend to happen as well (Murphy’s Law).
What is Your Recession Budget?
Why I like to use credit cards for routine emergencies. I prefer using my credit card for common emergencies because it forces me to pay my debts quickly. I seriously hate credit card debt, and having it makes me lose sleep.
If I always use my cash emergency fund for routine emergencies, it depletes quickly. There is always something that will prevent you from replenishing your emergency fund. For me paying off credit card debt forces me to accomplish my mission. You may be different.
Becoming an advanced credit card user. I am just now becoming an advanced credit card user. My wife and I survived the season of debt in our 20s and 30s.
We have zero credit card debt and are growing our emergency fund. Becoming an advanced user is about balancing your emergency fund, maintenance fund, free cash flow, and credit cards.
I am not concerned about earning points and rewards; it’s too early. I would say that having $30,000 in available credit card balances is appropriate at this stage.
Credit Cards vs. Debit Cards
I have about $60,000 because I recently opened an American Airlines credit card. I did this because I live in San Diego, and my wife lives in Florida, so I’ll travel back and forth.
Besides those frequent flier points, I avoid my credit cards. However, I sleep better knowing I can cover a sizeable routine emergency with credit and cash flow.
My Discover debit card gives me one percent cash back, which is all the rewards I need now. Being an advanced user is about controlling yourself with your card.
Conclusion. Don’t worry; expert credit card users can seek points, rewards, and miles. However, they also have fully funded emergency and maintenance funds.
Renting Rooms vs. A Recession
They view credit cards as a game of making life better through leverage. As advanced users, we build our power by saving, investing, and creating cash flow.
Do not rush through your advanced credit card phase too soon. If you attempt to become a rewards champion, you could begin to carry a balance.
I am currently an advanced credit card user because I maintain a zero balance. I have an emergency fund and a hefty cash flow, and I hate consumer debt.
I have no urge to buy things randomly or spend money frivolously. Once I reach a fully funded six-month emergency fund and $10,000 in maintenance funds for each house, I may aim to become an expert user.
Right now, avoiding credit card debt is key to my livelihood. I have no desire to relive the days of having $40,000 in credit card debt—been there, done that. Getting out from under this debt made me an advanced credit card user. Good Luck!
- PDF of the Month: How We Plan to Retire on Dividends 4 (Free 139-Page PDF)
- Free PDF Downloads: Download FREE PDF LIST here
- Financial Mindset: Become CEO of Yourself 2 (Free 196-Page PDF)
- Retirement Planning: Your Retirement Planning Guide 2 (Free 255-Page PDF)
- Investing: How We Plan to Retire on Dividends 2 (165-Page Free PDF)
- Cryptocurrencies: Counting on Crypto 2 (Free 159-Page PDF)
- Real Estate: Financial Independence through Real Estate 2 (Free 123-Page PDF)
- Business: Retire Rich, Retire Comfortable with a Business 4 (Free 149-Page PDF)
- Latest DGWR: Don’t Gamble with Retirement 8 (Free 445-Page PDF)
- Everything!: The Biggest Book on Passive Income Ever 2! (book)(Web Edition)(Art Edition)
- I bought a Kindle Oasis: Check it out on Amazon
- Read My Books for Free: Free Kindle Books Schedule
- Crypto Exchange: My Favorite Crypto Exchange VOYAGER (Join Voyager)
- Kindle Unlimited: Why I Finally Subscribed Kindle Unlimited (learn more)
- Book Reviews: 505 Takeaways from 101 Books (pdf)
- Writing: The Publishing Chronicles (Part 1, Part 2, Part 3, Part 4, Part 5)
- Best REIT- Fundrise: REITs vs. Homeownership (Join Fundrise)
- Follow us: On our Facebook Page and Join our Facebook Group
- Support the Channel on Cash App: $Kingmarine1981
- For more detailed analysis, join my Youtube: MFI YouTube Channel
Monthly Dividend Tracker Template: Buy on Etsy
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
Leave a Reply