When thinking about your finances and specifically your credit situation, it’s very important to get clear in your mind from the very start, what your main drivers are! What DON’T you understand about finances? There are many people who do not have the basic knowledge they need to make informed and smart choices. So, educate yourself as much as you can before you start to plan and make choices. Coming from a place of knowledge in all facets of life is what we should all strive for, and is absolutely vital at the start of your financial journey. It will guide you, inform you of the best decisions and choices along that road. Play the long-term game!
Too many problems with people’s financial situations occur and sustain because they have unrealistic expectations. Priorities are also hugely important to understand, set out and stick to. Do you worry about retirement? Do you have children who will need help with college? If you know your goals and how important they are, then making some sacrifices to achieve them is far more acceptable.
So, here are some things to keep in mind:
Credit IS NOT cash… if you can’t afford it, don’t buy it. Repeat over and over and understand why. Be as cash-based as possible. If you have a checking account with a debit card AND credit cards – which should you use? Use your checking account! It will have lower interest rates, less ‘cost’ of spending.
Always keep your credit balances below 30%. Credit cards charge you just for using them in most cases. So, when you open your wallet or purse and wonder which card to use, it’s not a choice. Irresponsible use of your credit cards shows a lack of restraint and will only result in worse spending habits.
PLAN for it.
If you need to buy a new piece of furniture or want to decorate a room in your apartment or house, there is nothing stopping you. However, making the choice to use a high-interest credit card to get it NOW is bad financial sense. Instead, get into the habit of planning. Plan and come up with an achievable schedule to reach that aim or goal. Not only does this train your financial brain with better habits, but when you do get that delivery of your new bed, or couch, you will have the clear conscience, free of worry about paying it off.
Plan BEFORE you buy. Sitting on that couch thinking of how you’re going to pay for it will not breed relaxation and pure enjoyment. Waiting a few months and achieving results with no debt hanging over you will reduce your overall stress… in fact, it will motivate you to achieve more.
Prepare for the worst.
More than one person here at The Bargain Radar has shared their anxieties about not knowing having a financial Crystal Ball! What is around the corner? What could be the impact of an unexpected medical bill or suddenly needing the finances to assist your parents or children?
Living month-to-month or week-to-week can be hugely stressful. It is great advice to try and build a nest egg that would allow you to cover all your living costs for at least 2 months. So, if you did lose your job, or you or a loved one was taken ill, you have a buffer to deal with the things life throws at you WITHOUT having to resort to expensive credit options.
Be honest with yourself.
DO NOT ignore situations you know will only get worse. This is something most of us do, but a lot of us do not admit to. This can cover so many things – a parking ticket that goes from $100 to $1,000 and a collection agency. Convincing yourself you need a vacation when you can’t afford it, that is you did take would just see you stressing while you lay on the beach. Be clear, be honest and take care of whatever that cost is as soon as possible. If you can’t solve it immediately then plan straight away on how to achieve the result you need.
Also, be honest with yourself when planning your budget. If you like to eat out and socialize, that’s totally fine. However, you must save elsewhere. Do you prefer a meal out, or a movie night? Does your clothing budget outweigh your need for a night out? Know your priorities and keep to them. Unless you are in a financial position to afford anything you want, you can’t do everything! In real life, choices must be made and stuck to.
Be SMART.
Be smart in all financial choices – know how to save money on everyday things like groceries. Evaluate your bills and get help to lower them. The Bargain Radar has advice and articles on all these items. Go and read and let us know what you think!
All these things will help you to avoid getting yourself into a position where you misuse credit and live beyond your means. Credit can be a very useful thing to improve your life, but it often is a major cause of concern.