Bad Habits in Using Credit Card Will Make You Run in Debt (2)
From the previous article, we know that having too many credit cards, split the card every transaction in your daily life but not checking the credit reports will make you spend too much money unconsciously. So we suggest that you should use cash or debit card sometimes to avoid overabundance of debts. And well, you may feel better when you receive the bills.
Now we will continue our topic.
4.Neglect to create a monthly budget.
Making a monthly budget can be of great help in your financial management plan. However, for some unknown reason, many people in the world consider budget as a bad thing or something that only low paid individuals can think about. Budgeting is essential for your routine purchases, such as the daily necessities, and paying the bills to make sure that you are not spending more money than you can afford. Making budgets allows people more aware that how much money they spend and where their money is going to. On the other hand, it also make sense for knowing future expenses.
So, you can create a detail budget, and record your spending. Then check your budget and your spending to see if money is being spent on unnecessary purchases and can trim your costs to help you save up some money in the future.
5.Sign up retail store credit cards for discounts.
It is effective when you have paid off the balance each month that you can promote special savings for using them. That’s because most of the store credit cards have much higher interest rates attached to them compared to the rates from major credit cards.
If you need to make a purchase on credit, use the major credit card (general-purpose credit card) you hold, especially when you are not sure enough you can afford to pay off the purchase within the month.
6.Not saving money for emergencies.
Remember to save for emergencies. Many people create an emergency fund for unanticipated expenses so that they can have the immediate gratification of acquiring an item that will satisfy their desire. If you classify the emergency fund into your credit debt, it must be unwise. The unanticipated expenses are one of the leading contributors to falling into debt and can cause the accrual of late payment penalties from creditors, higher interest payments on credit accounts, and less credit available for any other unexpected expenses that just might arise.
So, create an account for the emergency fund, and make it maintain at least three to six months’ worth of living expenses. If you receive a raise or bonus, add that money to savings. Since you’re not used to the extra cash flow, you won’t miss it.
7.Paying the banks first, then yourself.
“Always paying yourself first.” This is the most remarkable phrase I learn from the book Rich Dad, Poor Dad. You should save some money into your emergency fund if the rest are merely enough for your bills.
The order of paying all the balance seems not matter, but it does. Think about this. If you pay off the balances on your credit cards first, then you find you can’t make the minimum on your house payment or monthly rent. That would be disaster. Before you have change your spending pattern in the future, you have to live.
So, check your priority list. Deal with your house or rent payment, and then the necessities such as utilities, groceries and medical care. Then car payment, secured loans, and co-signed debts. Or check the laws or provisions that may help deciding your payment plan.
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