The joys of endless spending
You are at your local shopping centre and spot a pair of shoes, a couple of glossy magazines, and the prettiest jewelery you’ve ever seen. You’re drooling and want just one thing: to have those items. Reaching for your wallet, you realize that you are out of cash. You spent it all on grocery shopping.
But thank heavens you’ve got a credit card! You enter the shop and start spending before you go home to enjoy your new belongings. The shoes look fabulous on you, the magazines were a great read and your new necklace with matching earrings is the envy of all your friends. Now isn’t that just super?
Sure it is! Until you receive your next credit card statement, that shows you mercilessly how deeply indebted you are.
Thankfully there are several things you can do to prevent you from getting into a big mess before it is too late and you end up having to sell your everything just to be able to buy yourself some food.
Cut Down on Your Expenses
Your first step should be cutting down on your expenses.
Stop! Think! You have just spent this week’s budget on the groceries - and maybe bought a few little extras you didn’t really need to feed your family. You really want those shoes, you must have those magazines and you need that necklace! But do you?
Quit buying things you do not need.
Lower Your Limit
Unfortunately, self-control is not always easy. So you will need a backup plan, to make overspending more difficult: Lower the limit on your credit card.
That’s easy enough: Simply phone your credit card company and ask them to lower your card’s limit. If you earn about $1,000 a month, lower your limit to $500 a month. Some credit card companies might not be quite willing to oblige immediately - there’s more money in it for them if you keep overspending - so you’ll want to stick to your guns. Once you’ve lowered your limit, overspending becomes much more difficult.
Lower Your Limit
Lowering your limit, however sensible, will not help you if you own five, ten or even twenty credit cards. Why would you want so many credit cards anyway? To pay off your accumulated debts with more borrowed money? That is definitely not a smart thing to do. So, cut up all those extra cards and keep just one or two at the most. For goodness sake, place them in a bowl of water and put them in the freezer - I am not kidding! - and keep them there so you won’t be tempted to use them all the time.
Pay Off Your Debts in Time
Make paying off your balance in time your first priority, because you will end up in deep trouble fast if you are slow to pay. You will get a bad credit record, which may prevent you from getting a mortgage or a loan when you really want or need one.
Never just pay off the bare minimum, but always more than that. Preferably you’ll pay your whole balance every month, but when you’ve been spending too much for a couple of years, this may not be possible yet. Whatever you do, pay off as much as you can each and every month. The sooner you are out of debt, the better.
Don’t Use Your Credit Card When You Could Pay Differently
No matter how convenient it might be to use your credit card, do not use it to pay for anything if you can use other methods of payment. If at all possible, pay cash. Paying cash will give you a firmer grasp on your financial reality. You just held the money in your hand. You’ve seen how much will be left in your wallet if you spend this money now. You can feel immediately that you are parting with a certain amount of money, which is very different from paying with that magical plastic card. The “play money” you use to buy all those things you really do not need.