Getting all mixed up in financial chaos is the last thing you need when you are already having a hard time making ends meet. It is no secret that the economy is being driven by the purchasing power of the people. This basically means that the more you are able to spend, the better and stronger the economy becomes.
But that leaves you prone to making excuses with your bad financial executions. You get to convince yourself that you are spending as much as you can because that is the way the economy works. That is partly true but you do not need to use it as an excuse to be in debt. You can be in debt but being comfortable with that situation breeds more financial problems.
It is all too common that people are in financial ruin because they have too much debt that they need to address. One of the earliest challenges to a consumer’s life would be their student loans which they rack up on college. Although a lot of people would point out that this is actually an investment for a better future, the amount would stick to them for the year to come.
As they start in life, they take on mortgage loans and auto loans as they try to provide for their family the comforts in life. And then there are credit card usage that seems to be an integral part of day to day financial activity of people. This also has been largely blamed by a lot of consumers for the financial chaos and demise that they are in.
Creditcards.com explains that when an average card user carries a balance in their card, it runs to about $7,494 n average. That is a big amount that can have adverse effects on other budget items. But you need to understand that these cards actually has a lot of benefits for its users as long as they know how to take advantage of it.
Financial chaos from wrong card habits
People are quick to blame their credit cards for the mess they are in but here are some habits that people have developed over the years that are actually contributing to their financial conundrum.
Making minimum payment is acceptable
Once you receive your statement, there will always be a minimum payment amount indicated in there that will reflect a much lower amount than that of your total bill for the month. As the name suggests, it is the minimum figure that you need to send to your lender to keep your account current. But current is not good enough.
Once you settle paying for just the minimum, your lender now starts adding fees and charges to your next month’s billing statement simply because you did not settle in full. These fees will eat away at your principal payment that it will take you sometime before you pay your balance in full. By then, you would have spent a hefty amount just on fees alone which you could have used to make investments.
Using the card while paying it down
You might have planned to pay off your card at some point and might have even started doing so. But as you settle a big chunk off of it, you might be tempted to use the card again. It is like scratching away at a wound that has just began to close. You might not see the end of it or even worse, you are actually making matters worse.
If you are is so much financial chaos that you decided to pay off your cards, you need to make sure that you eliminate or at least lessen the use of that same card. You can opt to a cash-only budget for the meantime or leave that card at home. The idea is to resist temptation and try to use something more tangible like cash when making payments.
I do not need to see my statements
You might have a photographic memory and not find the need to even peek into your monthly statement because you are sure you know what is in there. That is a superpower that would have better use elsewhere because when your statement comes in, it is a good habit to open it up and see what is inside and how much you actually owe.
Nerdwallet.com shares that these statements would include your account summary, payment amounts and instructions and rewards details among others. Apart from letting you know how much you need to pay, it also helps you keep track of your financial security and even and accuracy of the charges you are paying for. Checking your statement will help you see if there are suspicious activities in your account or if there are any charging mistakes that you need to call out to your lenders.
“I do not need to keep track of my card usage”
This is one of those habits that will definitely send your finances spiraling down in a sea of debt and red notices. You cannot throw caution to the wind when using your credit card because it is a double-edged sword. Use it wisely and it can actually help you maintain and even increase your credit score. Abuse it and it comes back at you with fees and penalties that can ruin your household budget.
You need to keep a close eye on your card activity all the time. You need to be in control rather than being controlled by your card. Temptation coupled by the lack of financial control can contribute to year’s worth of financial regret. You might end up having to sell of items that you really need to make ends meet because you were too quick to purchase things that you did not have any use for.
“I do not need to change my ways”
You cannot teach old dogs new tricks but when it comes to your finances, you better try. Just because you were accustomed to getting first dibs on those sneakers doesn’t mean you always have to do it. If you have the money to do so then go right ahead. But when you are merely using your card, a.k.a. taking out a loan, then you better rethink your financial strategy
You need to understand first where your shortcomings are so you can address them head on. Do not be afraid to make a self assessment because that will greatly help you in the long run. You need to know which areas in your financial habits needs to change so you can put in a plan to recovery. The earlier you start working on it, the better.
Climbing out of debt
If the time comes that you are already in debt and trying to get out, here are a few things you might want to consider.
- Check what you owe. Before you try to get out of the financial chaos that you are in, you need to make sense of the problem. Check what you owe, who the lender is, where the debt came from and the interest rates among others. Compile them to see where you stand and how you can pay them off.
- Be aggressive with high interest rate debts. High interest payments are a killer and can ruin your long term goals. You can look into debt consolidation to be able to combine all, if not most of your debt obligations under one account. This helps you track them better and schedule your payments around your financial calendar.
- Set aside an amount for your reserve funds. You need to make sure that you are able to set up and put in some funds into a reserve fund which will help you stay away from getting in debt when unexpected financial emergencies happen. This fund will be a lifesaver when you go through tough financial times in the future.
It is hard to be in financial chaos and at times, you might even feel that there is no way out of your situation. But you need to remember that there are no problems that you cannot handle. You just need to get your head in the game and have a desire to change your ways.