After becoming debt-free, I'm using credit cards to help me save money and reach my annual retirement savings goal in 2021

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  • Now that I'm debt-free, I'm focused on saving money for retirement any way I can.
  • In 2021, I plan to open and use cash-back credit cards to boost my earnings. Between big welcome bonuses and spending on everyday purchases, I'll get even closer to my yearly retirement savings goal.
  • I'll time my card applications to coincide with planned large expenses and use them to meet the minimum spending requirement for the welcome bonus.
  • Read Business Insider's guide to the best rewards credit cards.

After living for more than a decade with over $80,000 of debt, this year I finally became debt-free. I was able to claw my way out of debt by being diligent about spending mainly on necessities, with occasional splurges, especially while paying off the final $30,000. 

It also helped that during the height of the COVID-19 pandemic, even though I lost income, I was able to save by not doing in-person grocery shopping and getting refunds on planned trips and concerts. 

The process felt slow, but the bulk of paying off my debt happened over the last two years, as I got more serious about meeting my goal. What helped me the most was asking myself before any non-necessary purchase over $20: Do I really want this, or will I be happier once I get out of debt?

It's been an adjustment to start to think about the next steps to take in my financial journey. The first month I didn't have to pay my usual $600 payment toward my debt, I felt "rich." But as I've mentally acclimated to this new way of life, I've realized that simply not carrying debt isn't enough — especially at age 45, when I need to think more seriously about retirement.

While I've been saving via a Roth IRA for the last few years, now that I have more financial resources, in 2021, I plan to help reach my new retirement annual savings goal of at least $25,000 with the help of rewards credit cards.

How credit card rewards will boost my savings 2021

While that may sound counterintuitive, as someone who once had to declare bankruptcy because of credit card debt, now I know that there are ways to use credit cards to my advantage. Since my credit score is over 800, I feel comfortable applying for new credit cards strategically.

To start, I've budgeted as much of my spending as I can for 2021. Save for a springtime house rental as a vacation with my boyfriend, to make up for a trip we had to cancel this year due to the COVID-19 pandemic, I'm not sure yet if I'll be doing any other traveling. But for other bills like rent, utilities, food, website hosting, and office supplies, I can estimate the costs.

I'm looking into cash-back credit cards without annual fees, like the Bank of America® Cash Rewards credit card, which has a $200 cash-back offer after you spend $1,000 on purchases in the first 90 days of account opening. I just did a large amount of holiday gift shopping, so in terms of regular spending, for most of 2021, I can't guarantee I'll have $1,000 in expenses I'll want to put on a credit card within that timeframe.

But I do know that in February or March, I'll have to pay my accountant, who charges slightly more than that (for business and personal taxes), so in one transaction, I'll be able to satisfy that requirement and get $200 cash back, which I can use for groceries and earn another 2% cash back, or 3% cash back on online shopping, one of the options you can set each month. Those amounts apply up to $2,500 in combined spending per quarter; any purchases beyond that only yield 1% cash back.

I'm also considering the Citi® Double Cash Card, which offers 2% back on all purchases — 1% when you buy, and 1% when you pay it off. That would make much of my shopping easier since I wouldn't have to worry about going over a certain amount per quarter.

If I didn't already have it, I would definitely get the Chase Freedom Unlimited®, which offers $200 after spending $500 in the first three months from account opening. (The Chase Freedom Flex℠ card also offers the same bonus.)

Citi® Double Cash Card

Citi Citi® Double Cash Card

The most challenging aspect of figuring out which cards and welcome bonuses make sense for me is that since I'm a freelancer whose income varies month by month, I have to remain flexible about my spending. I know for sure I'll be hiring my accountant, because I have no choice, but any other major purchases, including my vacation, are dependent on being able to pay my bills and meet my savings goals.

If I discover in January that my book sales have dropped dramatically, my part-time jobs dry up, and I'm only making enough to pay my most basic bills, I will have to adjust my credit card usage.

Keeping track of credit card rewards

The other key thing I'll be doing to better my finances for 2021 is creating a spreadsheet to track which cards I own and in which categories they offer cash back for each quarter.

In the past, I've often forgotten to maximize my spending in these categories, essentially leaving money on the table. Even worse, at times I've forgotten to activate my credit cards' bonus categories, so I thought I was getting a certain percentage back, but I really wasn't. 

I know my Discover it® Cash Back will offer 5% back between July and September 2021 on purchases from restaurants or made via PayPal. That's so far away I doubt I'll naturally remember it if I decide to pick up takeout on, say, July 3. But I plan to consult my spreadsheet at the start and end of each month and plan purchases accordingly.

I don't know exactly how much I'll save using these methods, but whether it's $100 or $1,000 (or more), that's still money that'll be in my pocket rather than someone else's. 

Citi Citi® / AAdvantage® Platinum Select® World Elite Mastercard®Chase Marriott Bonvoy Boundless™ Credit CardChase Chase Freedom Unlimited®

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