Watch Me Become A Millionaire

As you know by reading my previous posts, I currently hold a significantly high balance on credit cards. As I set out on my path towards financial independence, I knew that the first challenge I would have to confront would be the credit card monster.

It does not make sense to throw away money on high credit card APRs. At the earliest opportunity, I opened a couple of 0% introductory APR credit cards and transferred the majority of my balances over to them. In most cases, these credit cards offer an introductory APR of 0% for the entire year - More than enough time to allow me to significantly reduce my credit card balances without feeding them outrageous percentage rates.

However, after I had transferred the majority of my debt to these 0% APR cards, I still had approximately $5000 that was sitting on a high interest credit card. Looking at one of my available credit cards, I noticed I had an offer from my Discover Card featuring 7.9% APR + the balance transfer fee (In this case, it was 4% to a maximum of $99). The card that I had $5000 on had an APR of 22%!

Let’s look at some numbers here to see just how much money would be thrown away on the higher balance credit card:

Transferring $5000 to the 7.9% APR credit card translates to the following numbers: A one time fee of $99 + $395 in interest for the year (7.9% - Keep in mind, I am not taking into account the monthly payments that would subsequently reduce this balance along with the associated interest rate. To keep things simple, let’s just use the interest for the year that would be owed at that percentage rate).

Now, take a look at the interest for the $5000 had I kept it on the 22% credit card: $1100!

So, just by transferring my account from a 22% interest rate card to a 7.9% interest rate card, I am saving approximately $600 a year!

As I mentioned, these are not exact numbers - This is not taking into consideration the balance that would be reduced along with each payment.. But you get the idea.

WHY pay these guys more money than you have to? Paying down or paying off high balance credit cards first, or transferring those balances to lower or 0% APR credit cards is an essential step for me if I am to one day achieve financial independence.

Ideally, I should not have any balance on any credit card. But the reality is, I do. To deal with this reality, I have to do all in my power to see that my balances are paying the lowest possible APR.

I make it a point to incorporate the expression “a dollar saved is a dollar earned” into my life.  There are many great opportunities everywhere to save money if one is only to look.  For example, I make it a point to get coupon codes for any items I buy online.  Three such sites that I check for coupon codes or rebates are www.coolinmyopinion.com, www.comparebeforepurchase.com and www.rebateandcoupon.com.

Why pay more for the same item when, just by doing a few minutes of research, you can save tens or even hundreds of dollars? Achieving financial independence involves the wise use of one’s money; One such wise use is not paying more than you have to.

I will be the first person to admit that I will occasionally go and spend around $4 for a latte at a coffee place.  In order for me to achieve my ultimate goal of financial independence, I have to curtail this activity somewhat.  But again, going to extremes on any matter is usually, in my opinion, not a productive thing to do.

Instead of cutting out going to coffee shops entirely, I will limit myself to getting a coffee on a special occasion - Say, on the Friday at the end of a work week in the evening, and maybe one more on the weekend.  To those who buy 3-5 coffees a day, this may sound absurd - But I was one of those people who would buy 3 or 4 lattes in one day.  4 lattes! That’s around $16! Multiply $16 by 365 days and you’re spending $5840 a year.. on coffee!

That’s the same coffee you can make at home! Yeah, I know - “It’s the ambiance“. I’m not paying $5840 a year for that ambiance anymore.  A latte here and there is okay for me - But not 3-4 a day.

Look at it this way; With all of the money you save not spending on lattes, you can actually buy stock with the coffee company instead.