To be Money Elite, you need to maximize income from spending, which just means you need to earn money from spending. One of the simplest and easiest ways to do this is by using a high rewards credit card.
In the last five years, since January 2015, I’ve earned $3,237.19 cash back from just using my Citi Double Cash credit card that offers 2% cash back on all purchases, which I waited to redeem until earlier this month. If I include the signup bonus schemes which I’ve only tracked since 2012, then that’s an additional $6,550 or about $9,787 total since then. If I were to estimate how much cash back I’ve received in the past decade, I would say I’ve certainly made at least $12,000 since 2010 by doing nothing more than paying for things with a credit card. #MoneyElite.
Good news is you can probably do this too. You don’t need to do anything elaborate or overly difficult. You just need to find a high rewards credit card that optimizes your spending and follow these two rules without doubt:
- Pay for as many necessary things as you can with your credit card and 1
- Pay off your statement balance in full every month2
How much you get back will obviously be a function of how much you spend, and your financial independence is contingent in part on how little you can spend, but since living requires spending, you might as well get something back on the spending you do have to make.
I don’t know how much you spend per month, but if your spending is similar to those that hold the most common type of credit card (VISA), then you spend about $843/month on your credit card or $10,116/year, which would equate to about $202/year cash back using a 2% rate, or $2,022 over ten years. Two grand over a decade ain’t bad, and it’s definitely better than nothing, but I think the average family can responsibly put alot more than $10k/year on their credit card, assuming of course they follow the two rules above.
The average American household has $61,224 a year in expenditures according to the most recently available report from the Bureau of Labor Statistics:
Now that $61,224 in annual expenditures likely can’t all be paid with credit cards since things like mortgages, student loans and health insurance typically can’t be paid with plastic, but at a quick glance it seems to me there’s about $25,000 to $30,000 of expenses that probably can. And paying for all those expenses with a rewards card like the Citi Double Cash card would equate to $500 to $600 cash back a year, or $5,000 to $6,000 over ten years. Who doesn’t want free money just because of the payment method they choose, for something they were already going to purchase?
If you have the self control to only purchase what you can afford to payoff every month and the discipline to make sure you completely payoff your credit card on time every month, then hundreds to thousands of dollars in cash back over the next decade await you if you’re not already taking advantage of this.
- I use the word “necessary” because in case it’s not clear, you should not simply buy unnecessary things or make impulsive purchases with your credit card for the sake of just earning cash back.
- It probably goes without saying, but you should only spend what you are certain you can payoff every month.
