A credit card is a credit card. It allows you to borrow money from the bank in small amounts without any collateral for your day to day transactions. You are given a revolving line of credit that you can use again after you pay the principal and the interest. However, the credit card company or the bank is going to charge you about 3.5% interest on your purchases that were not paid in full in 30 days.
Credit cards have credit limits, but it doesn’t mean you have to fully utilize the card up to its maximum credit limit. It is important to consider your ability to pay before you decide to make any purchase. Credit cards give you the chance to make wise financial decisions in strategically managing your expenses and earnings.
In choosing a credit card, take the offer or the card that works exactly how you want it to work for your finances. There are credit cards that give a rebate, cash back, and several other reward programs. However, this may work for you if and only if, you pay off the balance in full each month.
If you pay only the minimum amount due, you will not earn enough to make up for the rewards and end up sinking into deeper debt each time you make a purchase. List your expenses, especially your groceries each month to help you stick to your budget.
Here is what you are going to do to restore the health of your pocket. To help you with this, check out the best personal finance software you can download on your phone. Whether you want to track accounts, keep a budget, or do money management tasks, there is always one software that would help you keep track of your cash, expenses, and earnings.
All you have to do I power up your smartphone or your computer. Budget, save, and spend monetary resources over time. Take into account various financial risks and future life events. Spend a little or spend a lot, depending on your free money for the month.
Get better with your personal accounting and finance each time you make an entry and decide how you are going to pay on the due date. Personal finance is the science of handling your personal money, with one thing in mind. Think of your credit card balance, and not your credit card limit.
Think of your net cash flow and not your gross cash flow. This means you do not spend your gross income, because you still have to pay your health insurance, house rental, car, gasoline, groceries, taxes, and everything necessary. Seriously, this is where most people went wrong.
Having a budget is mandatory and the first step is knowing what you are allowed to spend through your credit card. Your budget is a financial roadmap that allows you to be stressed free, by helping you live within your means. Your take home pay is all there is to spend, but you should allocate something for medical savings, emergency fund, and retirement.
It is never easy to manage money, especially if you are already struggling and in deep debt now, but it can still be done. Automatically update spendable cash as you make purchases each day, so you get a real time view of your financial snapshot.
Don’t forget to buy only what you need at the grocery. This is where most men and women go overboard with their expenses. This sounds pretty simple, but you have to use your credit card wisely.
The trick is to avoid being into a major debt trap. Credit needs to be managed wisely and correctly. Keep your credit utilization rate at its minimum, that would be keeping your account balances below 30% of your total available credit.
Never max out your credit card at all costs. Credit cards are the main vehicle through which your credit score is built and maintained, so watch the credit spending!
To pay bills, set up direct debiting where possible, so you never miss a payment. Give yourself a break, and just monitor your credit card payment and due dates. Prioritize, assess, and restrain!
There is never too late for anything. You can start learning your basic accounting now, and manage your personal finance wisely. Be systematic and stashed some money for short term emergency needs.
Now, after you list your gross earnings, start listing down your utility bills and important items for grocery. It should look something like this. Utility bills can be your electricity, water, gas, phone, internet, etc.
- House amortization
- Credit card
- Brown rice
- Oyster sauce
Savings in Peso
Savings in Dollar
Cash on Hand
A budget is an estimation of your earnings and expenses every month. Budgets can be made every week, if you have the time, but should not be beyond each month. Keep in mind that you need to update your personal finance app each time you make a transaction or spend.
In the simplest sense, you cannot plan anything without the proper budget. Consider all areas of your personal finance management in an excel and get ready to be debt free in a few months. It is important to check your bank statements each month to review and confirm all charges.
Don’t forget that you have to pay what you charge to your credit card plus the interest. With credit cards, there is often a disconnect between the purchases and actually paying for the purchases, that most people hardly realize they are spending money.
You do not feel the pain of the purchase the way you would use a debit card or cash. This is one of the reasons most people tend to overspend with their credit cards. One study found that people are willing to pay more for a purchase when they used credit cards over cash.
Credit cards stimulates spending. The best way to control spending and manage your finances wisely is to stop thinking of your credit card as a free money, because it is never free, and you have to pay it back. Having a big credit limit is not the same as having a lot of cash money in the bank.
The best way to avoid getting into so much debt is to let your current balance influence how much you spend. Set your own personal credit card spending limit based on your income and other expenses. Monitor your credit card balance and make sure you can still pay it back.
If you have multiple credit cards, keep your combined balances within your personal spending limit. Stress, sadness, anger, jealousy, and boredom can all lead to overspending. Do not shop when you are upset so your emotions do not cause you to overspend!
Overspending impact is not immediately recognizable, but will gradually create problems for you. Think about where you want to be financially in the next 2 years. As you face spending decisions, consider whether your choices will help you reach your financial goals.