Monday, 12 February 2018
Maybe you use your credit cards to reward yourself with a splurge or to cover emergency expenses like car repairs.
In the moment, "buy now, pay later" doesn't seem like a big deal. Then you see the bill and realize you spent more than you thought — and you can't pay the balance off right away.
If you find yourself unable to pay off your balance each month, and you're racking up interest and late fees, it's time to take a serious look at your finances. By determining how and why you are using your credit cards each month, and making some changes, you can get off the slippery slope into unmanageable credit card debt.
Many people have no idea how much money they actually spend each month. Sure, they know what they pay for their rent, utilities, and car. But where the rest of the money goes is often a mystery. However, knowing where your money goes each month is essential to getting control of your finances.
To figure out where your money is going, try keeping a journal of every single cent you spend, whether it's cash, credit, or debit. Even if you put a $1 into a parking meter, write it down.
There are also multiple phone apps and online budgeting programs (many of them are free) to help track your spending. These also make it easy to categorize your purchases — such as groceries, entertainment, health, and dining out — so you can see where your money is going, and where you are overspending.
Most experts recommend you track spending for at least a month to get a clear picture of your spending habits.
Now that you know how much is going out each month, compare that to how much is coming in. If more is going out than coming in (and this is why you are using your credit cards), it's time to find places to cut back.
You probably can't make immediate changes to your housing and transportation expenses. But chances are there are other unnecessary expenditures you can eliminate or reduce. For example:
Once you've identified what needs to change, find tactics that work best for you, such as:
Earning more can also help you balance your budget and reduce the need to use credit. Fortunately, in today's gig economy, there are more opportunities than ever to make extra cash, like renting out a room, selling things you don't need, or finding freelance work.
Now that you have analyzed your spending and hopefully found some places to cut back, you need to focus on paying down the debt you've already accumulated. Most financial experts recommend tackling the card with the highest balance first and always paying more than the minimum monthly payment if possible.
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That's a question we often hear when we're shopping. We may automatically default to one choice, so it's easy to forget that not all plastic is the same.
With the right plan, you can reduce your credit card debt in as little as 12 months.