One Simple Credit Card Hack to Rule them All
The military tribe is no stranger to credit card hacking. There are great blogs, podcasts, and books all about credit card hacking. American Express offers its pretty platinum card and fancy lounges that frankly have become as bougie as a Greyhound station to help us advance our credit card hacking skills, but there really is one credit card hack that rules them all.
Let me start by asking you a question that I’m pretty sure you don’t know the answer to: How much do you spend every month? You may have a ballpark estimate, but I’ll bet that you don’t really know from month to month, and there’s a great reason why.
Between our credit cards, debit cards, payment apps, the occasional check, and even some cash, our spending is somewhere between a robust rat’s nest and a Gordian knot.
It shouldn’t be that way because there are so many great tools for tracking spending. However, they all take a lot of time to get any sort of accuracy, and few of us can endure the tedium of tracking transactions, splitting transactions, categorizing transactions, and just reliving transactions. It’s not fun.
But hey, we’re earning lots of points and miles, so it must be all good, right?
The Simple Credit Card Hack
This hack has 5 steps:
- Set your savings goal for the year, e.g., max out 2x IRAs ($14K), 10% into her TSP ($12K), and 15% into his 401(k) ($15K), save $12K into cash accounts for near-term goals, and $12K into taxable investment accounts for long-term goals. That’s $65K.
- Automate the transactions to ensure the savings happens.
- Confirm that the only money you’re pulling from savings throughout the year is from near-term savings for specific goals.
- Confirm you’re not carrying a credit card balance.
- Don’t worry about what you’re spending.
But the real hack is the first step: set, automate, and achieve your savings goals. If you’re doing that, and the goals are reasonable, you probably don’t need to worry about your monthly spending.
The Anti-Hack
The reality is that most of us do some automated saving via TSP and 401(k), but the rest of the saving only happens if we luck out at the end of the month/year/tax return filing and find some extra money.
Spending on credit cards ignores the realities of our checking account balance and the need for unspent dollars to save.
Points, miles, and perks do not compound. Dollars in our investment accounts do. But we must put them to work first.
The Acid Test
Steps 2 and 3 of the hack are the acid test. If you move money out of your checking account to prioritize your savings goals—good on you. You may find out that you moved too much for your spending that month. You may have to pull some back.
In debrief parlance:
DFP: Why did we pull $1K back out of our vacation account for a non-vacation expense?
EE1: We didn’t do any forward-looking budget before spending normally this month.
EE2: We spent throughout the month on 3 different cards each.
EE3: We don’t look at our credit card balances until the bill comes.
EE4: We don’t talk about the possible delta between our spending, savings goals, and checking account balance.
RC: EE1 because it should drive the fixes to EE2-4.
IF: NTIW map out in priority order: income, giving, saving, spending. If using cards for spending, I will cross-check card balances with checking account balances at least weekly. I will use challenge and response comms with my domestic installation commander / hair-brained husband (as appropriate) to update the spending plan. We will establish a JOKER spending level to avoid reaching BINGO or declaring a spending emergency.
Decoder for readers that just got hubcapped by fighter pilot debrief-speak:
DFP – Debrief focus point
EE – Execution error
RC – Root Cause
IF – Instructional fix
NTIW – Next time I will…
You get the point— if you don’t mission plan your dollars, you’ll run out of them before you hit all savings targets. The savings targets need to come first. If moving dollars to savings causes an overdraft, carried balance, or savings claw back, you know you’re spending too much on your credit cards. It’s time to make a change.
Cleared to Rejoin
I meet far more families that know how many miles/points/perks they earned last year than how many dollars they saved for retirement/college/goals. Spending on credit cards isn’t bad, but just because we don’t carry a balance or pay interest doesn’t mean we’re hitting the right targets. By setting and automating savings goals first, we force the right cross-check cadence between our credit cards and checking account. The best credit card hack is saving first so we don’t have to worry about credit card spending.
Fight’s On!
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