Avoid becoming credit dependent

close up of chip card

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.

Tagged in Smart shopping, Debt strategies, Build your credit score

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.