Are you a life hacker? Do you even know what life hacking is? For those not in the know, it is not a gruesome as it first sounds. Have you ever seen the website lifehacker.com? Go and have a look at it – this is another life game-changers, for so many reasons but primarily using the intellectual powerhouse of the human race, we can get together and provide innovative ideas to make life easier, cut costs, reduce time and increase efficiency for virtually any task at hand. When you think of it this way, life-hacking should be the first lesson taught in any school of FI. When you discover a life hack it really makes you feel that you are winning at life and sometimes the life hack has been under your nose the whole time you just never realised it.
Going to go a bit off-topic here as it wasn’t really a life hack but fake grass, sounds horrid but since we had it installed it has been amazing, no more wasted timing mowing and watering and every time you look out the window, you see a perfect lawn – well depending if Saroo has left us a little or mahoosive present – thanks not so little doggy. This is what I really enjoy along the lines of the Pareto Principle I have been banging on about recently, anything that can save time and effort so this energy can be spent on more productive or happiness building as got to be considered.
Well in this episode we will unveil a lifehack lesson from the Jones family. We have all learnt about the importance of having a high savings rate as a proportion of your income on our journey to becoming financially Independent. But achieving your target rate with consistency can be difficult – as we are often hit with surprise expenses and we sometimes don’t have the diligence and planning to ensure we hit our targets. Our solution to this? A credit card! Don’t worry I am not encouraging taking on extra debt, we utilise a credit card for many benefits, not just the points but that certainly is one of them. So my philosophy is this, a large proportion of your expenses you are going to have to spend no matter what happens, so if you can get as much of these necessary spending on a high benefit credit card the better. Ensure you pay off the full balance each month and earn the rewards and sit back with a big smug look on your face – being so proud of yourself! Before I get to my new-found life hack there is a warning to this process though, it requires discipline, and for us, that means extensive budgeting, understanding all our types of cost and how much comes out of each pot and importantly for the life hack what method of payment is used to pay the expense? After going through this process I was able to put all expenses on the credit card apart from:
- Home Loan
- Council Rates – There credit card rewards earned is less than the credit card charge by the council
- And… well, that’s it, well apart from the odd café and bakery that doesn’t accept credit cards – but we all need to watch those smashed avocados and lattes – especially in Auckland.
So it really is the vast majority of things that can go on a credit card, just watch for potential pitfalls like credit card charges and weigh up the benefits against these charges (note if there is a charge it is often not worth it, but worth a check). Here is a tip, not the full life hack but a sub-part – have a look at your direct debits and automatic reoccurring payments and contact these providers and ask if you can pay by recurring payment on your credit card, this is what
we did recently when changing utility providers and it is paying off, in small chunks.
Right to the lifehack, once you understand your expenses, their categories, maximised the number of expenses that can be paid by credit card and established a discipline around spending money, in terms of the number of transactions you will have very few that come out of your paycheck. For us, it is only three, the home loan and rates as mentioned earlier plus the credit card. The trick I have learnt this year is that when the credit card statement is issued you will have a few days to pay it, we set our repayment up so it always falls just after I get paid and we now set ourselves the challenge to pay off the credit card bill before the salary payment arrives – if we achieve this goal we know for sure that we will save at least $7,661 for the month, multiply that by 12 and that is at least $91,932, ad a bit of interest, extra income generation and cost-cutting to this and we can reach our $100,000+ target for this year with
relative ease. So the challenge is to pay more than the credit card bill each month without ever using my salary. This then becomes a game and mindset changer!
This is almost a paint by numbers strategy and stay within the lines and you really can create a masterpiece. The key is minimising the number of levers you need to pull to achieve your goal. Ours is just two levers, ensure minimal EFTPOS or cash spending which is so easy in today’s almost cashless society and the second lever is keeping tabs on disciplined credit card spending. Maybe I am right or maybe I am wrong but with a bit of discipline I think all of us
could do this but I do appreciate we are all wired differently and even Dave Ramsey is massively against the use of credit cards, but I guess it is about why and how you use credit cards to your advantage. So what are the levers you are going to pull to make sure you keep on track, have a think what would work best for you… and happy fiday.