Debt & Financial Responsibility
Let's talk about credit cards and other recurring, interest bearing payments...
Credit card debt accounts for a significant part of the debt carried by American consumers, but are they are really helping you? It depends. Being financially responsible involves more than simply making your minimum credit card payment. In fact, if you have a credit card payment, and are not able to pay your balance in full every month, you are already spending more than you earn. Responsible use of a credit card means paying the full balance on your account each month. Credit cards make it convenient to avoid carrying around cash, and maybe earning some rewards points here and there. But using them to live outside of your means may lead you down a path of debt, in which you are way over your head.
The same logic should be applied to any recurring payments, which involve paying interest. Paying interest on anything means that you are spending more for that item than the purchase price or even what the manufacturer thought it was worth! It may very well be the most convenient decision at the moment, but not always the most responsible.
As such, avoiding paying interest on things should be a major objective. Of course, when it comes to buying a home or a car, for instance, it would be virtually impossible for the majority of us to avoid some type of financing. Unexpected costs and emergencies come up from time, which call for a loan or some charges on the credit card. It happens to all of us. The key point is to prioritize purchases and minimize the amount you spend in interest each month.
Always remember that it is never too late to get on the right track and start becoming more financially responsible! Now, nobody expects you to wake up one morning and be a whole new, super financially responsible person, just as you would not be expected to run a marathon the first time you go running.
Learned habits take time to shake, as do learning new ones…and we all know that change is not easy. But by making a few small changes at a time, you can be on your way!
Here are some quick, easy suggestions you may incorporate into your daily life, which are guaranteed to help you on your journey!
- Really think about every purchase you make: Is this a “want” or is this a “need”? You need a car as a means of transportation, but do you really need the latest, greatest luxury car?
- Look for deals and promotions on products and services. With so many choices, the internet, and the level of competition between vendors, you cannot help but find great deals, which will save you a significant amount of money.
- Switch things up a little. Instead of going out to lunch every day, take your lunch with you a couple of days a week. If you are worried about the time and convenience factor, get online and you are sure to find cost effective vendors who can deliver a week’s worth of healthy delicious lunches for a fraction of what you pay to go out. Not only will you see a difference in your wallet, but also in your waistline. Win / Win!
- Establish a savings account that serves as an emergency fund. Take a certain percentage of each paycheck, and deposit that into your savings account. Too much work? Either have it direct deposited through your company (% in checking / % in savings) or simply have your bank set up auto transfer on the same day every month for that amount.
- Think Eco Friendly. A little goes a long way. Switch to low flow shower heads and energy efficient light bulbs. Wash your laundry and dishes on shorter cycle when they are not heavily soiled. Also, unplugging electronics while they are not in use makes a huge difference.
- Set goals and keep an expense “diary” or record and review it weekly, monthly, and annually. Physically writing things down holds you accountable to yourself, and believe it or not, does curb your frivolous spending.
Challenge yourself. Turn it into game – it makes it more fun. Use the tips I listed above, even come up with your ideas and strategies. Then, see the how things start to over time. I wish you a happy, healthy, prosperous 2015! Good luck!
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