Using credit is not a bad thing. In fact, for optimum financial health, you really do need to use credit in order to develop a solid credit history. The trouble, however, is that credit can be unforgiving, and once you start making mistakes with credit, those mistakes have a way of compounding.
One of the worst mistakes you can potentially make with credit is to become dependent on it. Ideally, you should treat credit as an extension of your budget. That means you either use credit only when you have the funds available to immediately repay your debt, or you borrow money with an understanding of how your monthly payments will fit into a balanced budget.
Once you start using credit as a supplement to your income, you’re going to have a hard time keeping up. Unfortunately, many people find themselves doing just that – making credit purchases they can’t necessarily afford. Eventually you may find that you have to use credit just to stay afloat. Fortunately, there are ways to help break your dependence on credit cards.
Tighten up your budget
Create a real, achievable budget, covering every expense (no matter how small). Maybe filling up at the station or picking up a few things at the grocery store were once expenses that would previously go unnoticed in your checkbook. However, even smaller ticket items add up. Try to get a full picture of where your money is going.
Cut back on non-essentials
The easiest way to free up extra cash is to know the difference between needs and wants, and make a conscious effort to do without those things that you don’t need such as eating out, vacationing, and certain discretionary items, such as furniture and electronics. Really focus on only buying the things you need and reshaping your buying habits to support your new budget.
Create a plan to pay down debt
Sometimes it’s easier to break a habit when you have a goal you are trying to accomplish. Make a commitment to pay down a portion of your debt within a certain timeframe, and get your family involved in working towards a shared goal. It’s very difficult to create and maintain a healthy, balanced budget with a ton of debt looming over you. Paying down your debt as quickly as you can manage should be a top priority.
Shelve your credit cards
If buying with credit is too tempting, consider carrying cash or your debit card for daily use. Leave credit cards at home and only carry one when you plan to use it for a larger purchase or something that you have already reserved for your credit card.
Finally, if your financial obligations become overwhelming and you find yourself losing control, seek help. Your human resource or employee services department may have options available. Consider speaking with a trained debt and budget counselor to see what options you may have to change your spending and get out of debt.