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Are you ready to examine your spending habits to see if they are harming you financial well-being?
Remember, you can fool other people most of time, but do you really want to fool yourself? Do you lie awake at night worrying about how you can afford to pay your debts? If you fall in the category of the people described below, you should seriously consider how to change your spending habits.
Using credit cards to pay for expenses when you don’t have the money to pay off the card
Credit cards are such a convenient and easy way to purchase things you want. Do you use your card to make purchases even when you know you don’t have enough money in the bank to make the payment at the end of the month?
Unless you are sure that you can pay of the credit in full at the end of the month, don’t use it. Wait to make your purchase when you have the money in the bank.
Roland Bleyer of Credit World warns about commonly held myths about credit cards.
“Credit card holders will often charge a lot of money on their cards and then take their time paying it off under the false assumption that doing so helps their credit score. According to this logic, as long as the user stays within their spending limit, they are not doing any harm. Unfortunately, the opposite is true” Roland founded Credit World in 2005.
Not keeping track of your budget.
Assuming that you have made a budget, this is a total waste of time if you do not track your expenses against it. If you regularly spend in excess of your budget, you have either not been honest with yourself when you made the budget, or if you have, you need to adjust your spending to keep to it. Certified Financial Planner Jeff Rose advises; “When the month is over, categorize and add up your expenses. Many people overspend on the following categories:
– Eating Out
These are categories you should monitor carefully.
Once you know how much you’re spending in your categories, make a few goals. Try lowering how much you’re allowed to spend in your problem categories incrementally, month by month.” Jeff is the CEO of Alliance Wealth Management.
Spending more than you want to earn reward points
Don’t get sucked into buying things you don’t really need just so that you can earn reward points. In this day and age almost every department store and supermarket has its own reward card system. Have you given any thought to how this financed? Are you in fact spending more to cover the costs of the reward you hope to earn? If you don’t need it, don’t buy it.
Leslie Tayne of Tayne Law Group P.C. warns;
“Provided they’re used responsibly, rewards credit cards can be an awesome thing. However, if you find yourself using a credit card just so you can rack up more points, you might be in for a world of trouble. This can be incredibly problematic if you’re trying to follow a strict budget or struggle to keep yourself from splurging on frivolous purchases.” Leslie is a business debt-related attorney and advisor.
Buying on impulse
If you are trying to get ahead with saving for a special purchase then always have a shopping list with you when you go shopping. TV is constantly bombarding us with special super duper deals that you absolutely must have. Resist the temptation to buy on impulse and only buy what you need.
Using one credit card to pay off another
This is also known as robbing Peter to pay Paul and is a seriously bad habit. I am not referring to transferring all your debt on a high interest card to a low interest card. This can in fact help in the short term, provided that you pay it all out within the specified time. I am referring to using your normal Visa card, for example to pay out a normal Mastercard. You are merely fooling yourself it you believe that this solves any problems. Remember, the more cards you have, the easier it will be to run up serious debt.
Barney Delcarmen is a freelance writer for CreditCard.com.au and successful businessman in his own right; drawing on his personal experience in life and in business he shares his insights into personal finance and money management.