Wednesday, April 26, 2017

I cut up my credit card!

I've been out of debt for many years now (the day I paid off the last of the credit card debt was a proud one!). However, I've always kept a credit card 'just in case'. 

I had a $7000 limit (completely unnecessary) and used it for situations where I was a bit short on cash. For example, when I had a crazy dental bill (I have bad teeth), 'needed' a new outfit for a job interview, had to buy things for my consultancy for which I'd be reimbursed later (airfares, hotels) and occasionally for things that I didn't want my partner to know about (embarrassing!).

However, today I chopped up the card, changed all the direct debits from the credit card to our joint savings account, and reduced the limit. I would have totally cancelled the card, but it seems that this needs to be done in writing or by actually going into the bank. (Sneaky.)

And what brought on this recklessness? I've started reading 'The Barefoot Investor' book! I'm pretty excited about his approach to managing money and have started implementing the steps. His dialogue on debt and credit cards is pretty interesting - particularly how they suck young people in and how having a credit card debt is ingrained in our society.

Anyway, I'm pretty confident that once I set up all the bank accounts he recommends, and also put into place all his strategies, I won't need to rely on the back-up of a credit card.

It's made me totally re-think how I run the money side of my (very small) consultancy. Up until now I've used my personal bank account for all the income receipt and expenses. Problem is, the income disappears very quickly (extra money = excuse to splurge) and I never have enough money to cover the bills (in particular the annual insurance premiums).

So now I've set up a separate online transaction account (free, no fees, and it takes about 5 minutes) with an attached online saver account (for better interest rates). I plan to save the next few payments so that I have a buffer, and then I can start transferring the income straight into our joint account (to be siphoned off to the various accounts).

Yay - no more need for the card! I think it's also going to make me more accountable not having that back-up option. It's a bit scary, but I reckon I can do it.

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