Today, I would like to introduce to you Patty Moore, a newish blogger at workingmotherlife.com She has some amazing tips and insight on how you may be living beyond your means on your credit card and way’s you can stop. I’d like to welcome her to my blog and to the blogosphere. You can connect with Patty on her blog referenced above and on Twitter at WorkMomLife!
It’s actually not that difficult to know when you might be living beyond your means on your credit card. By definition, you are living beyond your means when you need a credit card to fund any part of your lifestyle. But, it doesn’t usually dawn on people that they have a real problem until they are knocking on the door to credit card hell. Right now there are millions of Americans carrying an average balance of nearly $16,500 on their credit cards who are knocking on the door, beyond which is a life of financial servitude and dashed dreams. You don’t have to be staring into the abyss before realizing you have a problem. Just look out for the following signs.
You Carry a Balance on Your Credit Card
If you carry a balance month to month, it means you are spending more than you can afford. It may have started innocently enough with a small splurge and the rationalization that you would pay it off in a few months; but, because you are spending money you don’t have, it difficult the find the money to pay it off. Soon, you get accustomed to carrying the balance and build the monthly payments into your budget.
You know your credit card balance is getting high when you don’t bother to check it because you know you can pay it off anyway.
You Can’t Pay Any More than the Minimum Payment
If you continue with your spending habits — using the credit card to pay for things you can’t afford to pay for with cash — your balance increases. Unless something changes with your income or your budget, you will continue to carry a balance and it will grow. When your balance grows to $5,000 and you can only afford the minimum payment, you will spend more than $8,000 over 13 years to pay off the balance. When you start living your life making only the minimum payments, it’s time to reevaluate your lifestyle.
You Play the Credit Card Shuffle
The credit card shuffle is like robbing Peter to pay Paul. You’re juggling payments between the cards because you don’t have enough money to make the payments on time. You might make a payment on one card and take out a cash advance to pay another card.
You Can’t Qualify for a New Credit Card
One of the first things people do when they get into credit card trouble is to apply for another credit card. The day finally comes when you can no longer qualify because you’ve run up your credit utilization and you’re only making minimum payments, which causes your credit score to fall. If your credit card spending results in a late payment, you’ll have trouble getting another credit card for a while.
Budget? What Budget?
You may start out with a budget, but, when you start using credit cards to meet your living needs, the budget becomes obsolete. A part of it is denial because you don’t want to see how badly you’ve blown your budget. The other part is it is the recognition that you can’t really afford the lifestyle you are pursuing. If you had stayed strictly within your budget, to begin with, you wouldn’t be in the mess you’re in. Getting back on a budget is the only way out of the problem.
You Have No Savings
This really should be your first clue. If you aren’t saving money for an emergency or for your financial future, you could be on the road to financial ruin, especially when you carry credit card debt. What happens when you do have an emergency — your car blows up or you have a big medical emergency and can’t work for six months? A lifestyle pursuit should be put on hold until a six to 12-month cash reserve has been built up and you have the ability to set aside 10 percent of your income in savings.
When You See the Signs
The worst part of getting into credit card trouble is it’s a lot like getting into quicksand. Unless you do something immediately to get yourself out, you will only struggle and sink further. At the first sign, you should take these essential steps to correct the problem and turn things around.
- Reevaluate your lifestyle needs. You may have tried to bite off more than you could chew with your lifestyle choices. It’s time to get back to the basics of what you really need at this time in your life.
- Stop using credit cards. Put your credit cards on ice and commit yourself to cash. It guarantees you will only buy things you can actually afford.
- Establish a strict spending plan. Budget like you really mean it. Cut out the non-essential spending until you pay off your debt. Build your budget around your top priorities, which are to pay off debt and save.
- Set a goal to become debt and credit card free. You’ll enjoy the taste of financial freedom much more than an expensive dinner you can’t afford. Thinking about refinancing your credit card debt using a personal loan. Personal loans are relatively easy to obtain. They offered by a wide variety of financial intuitions including traditional banks, online lenders, and credit unions. By using a personal loan, you can lower your total interest expense and expedite your debt payoff.