by Chris Sheldon
Do you have your credit card under control?
Having a Credit card can often lead to racking up huge amounts of debt, well beyond your capacity to repay within the month required by most credit cards.
The holiday season, Christmas time, can be a particularly dangerous time for over-spending. “After pay”, credit cards, tap and go, all are fraught with problems for all of us. Using these easy-pay systems feels so easy and we think we can pay these items off at the end of the month. But the end of the month comes around quickly and we have forgotten about all the other items we also have bought, with absolutely no thought to keeping track of our spending.
Retail stores make it so easy for us to part with our money. We can pay the furniture or TV item off in two years’ time, but that time also comes around very quickly and huge fees can start applying, with no chance of paying it off quickly because in the meantime we have bought several large items, also on the pay-later scheme.
It’s such a trap for us all. Retailers just want our money whether we can afford it or not. We often know at the time of purchase that we won’t be able to pay these items off, but the desire for the product outweighs affordability. We just don’t realise how quickly debt can grow and often these items are things we don’t really need or could put off until we have the cash.
Many of us have been down this path of over-spending and built up credit card debt that has gotten out of control. If you cannot pay back your credit card debt each month, then you have a problem. If you are spending more than you earn, your debt will escalate.
The Solution to over-spending
The answer is simply to BUDGET. We all must learn the skill of budgeting properly, writing a list of the things we spend on each month.
The first step is to open an account for a DEBIT CARD.
We live in an age where things are changing very quickly and we want everything now. We don’t want to wait… we want all things bright and beautiful that we see every day. We want the brand-new car, and a lovely house to show off to our friends, along with the latest new furniture, of course. This can look very impressive to others but deep down we know that being up to your neck in debt can cause stress, leading to some long-term health issues. Our neighbours, friends and family may also be suffering from a similar debt crisis. Living well beyond our means is a major problem. From the outside, it looks like we earn a great wage and manage our debts. Some of us might be paying off the debt each month, but it is a huge issue for most people. Banks or finance companies lend money so easily and retail stores have sales all the time and we are tempted to buy the latest and greatest. We live with an ”I WANT IT NOW” age.
The top 4 things that most people want when they retire are …
- + To be debt free, their house fully paid off and to have a nice car
- + To be comfortably retired with enough money to enjoy a great lifestyle, being able to make lots of choices for themselves
- + To be able to travel frequently in their own country or overseas.
- + To be able to help their children financially.
This all sounds so familiar and to many so very unachievable, but by changing our ingrained spending habits, it can become achievable.
For a lot of us, most of our money each week is going out as soon as we get it, having to pay for all these items …
- The loans for the cars,
- Credit card repayments for the things we can’t afford right now
- A 25 to 30-year loan for the new home, paying interest to the bank at a much higher rate than we are earning on our savings account.
Over spending creates so many issues. We struggle to live in balance, causing much unnecessary worry and anxiety for ourselves.
Borrowing more is not the answer, as the cycle starts all over again.
Leakage and wastage
We need to look at where exactly is the leakage or wastage happening. The money that is going on STUFF we really don’t need or can do without. The one item that give us no pleasure and we don’t feel happy about is CREDIT CARD INTEREST. And this is one of the biggest causes of leakage. If you are still paying for the holiday you have not long taken, you obviously could not afford it in the first place. If you keep putting items on the credit card and you never pay it off, just keep paying the monthly fee, your debt compounds.
Sound familiar? If so, you need to take a good look at the monthly interest that you pay on each credit card or any other items you are paying off. To seriously address this leakage or wastage, you may need to take out a loan for paying off all the items you have listed and reduce your credit card limit and only use your credit for emergencies or services charges only. Then, take out a debit card where you put in each week an amount you can afford for food, petrol and essentials each week, to get your spending back in check.
Then, look around your house and yard and see what items you could sell that you are tired of that could bring in money to help reduce debt.