It’s all too easy to rack up a ridiculous amount of debt if you are not careful. The credit card companies make money off of your spending and they want you to keep spending. That’s how the banks make their money and how you lose yours. In this article, I am going to discuss how you can avoid some of the most dangerous pitfalls in the financial world that a consumer will be faced with.
First and foremost, understand how a credit card and debit card are different and how they are the same. A credit card is used to make purchases on a borrowed dollar. You don’t have that money. Even if it is in your account the credit card is a way to spend credits that a bank is giving you. This is the reason that they keep sending you checks and offers of pay advances. They want you to buy big TVs and air hockey tables that you really can’t afford. You are then charged for this service through the interest on the card, the APR and any yearly fees that they decide to charge you. If you don’t need a credit card then you should establish one and never use it. Hide it in the bottom of your purse or the back of your wallet for dire emergencies.
A debit card is a bit different. This is tied directly to one of your accounts and draws money directly from said account. This is a better option than a credit card, simply because you don’t have to worry about interest. On the other hand, you still need to worry about overdraft fees. If you don’t know how much money you have in your account and decide to shop for air hockey tables, you may be in for a rude awakening when you find your account in the negatives.
The following are a few guidelines for budgets for those who haven’t used them before.
Establish a Spending Plan or Budget
Spending budget, it’s a phrase that lots of adults fear and many others avoid. They believe the prospects of creating a budget or spending plan is equivalent to torture. By developing a spending plan, you’re no longer capable to purchase anything you like. They feel they’ll be miserable and won’t ever be allowed to have any fun. The reality is a spending budget doesn’t need to be something to fear or be terrified of.
Creating a budget can achieve a whole lot for your financial outlook. If you realize how much income you have every month, what essential costs there are, and set some aside for the future you’ll also realize how much discretionary funds you have available to you. Without having a spending plan you’ll probably be spending money you don’t possess for things you don’t really need. You may even be wasting money by buying items impulsively instead of trying to find the most value for the price.
Absence of a budget, which includes not knowing what happens to your money, can be disastrous. By not knowing where your money goes each month you may have a tendency to pay bills past due. This not just causes to pay a late fee, if we’re referring to credit cards, it could even result in interest increases which seem outrageous. Fall behind too far on some bills and you may be up against complicated financial issues such as bankruptcy, home foreclosure, having your vehicle repossessed, or being evicted from an apartment as well as the negative affects non-payment of bills can bring about to your credit rating.
It does not matter if you’re earning minimum salary in your first job or if you’re among the top money earners in the country. Owning a spending budget can be a financial life saver. You don’t need to hire a professional financial planner; you can develop a spending plan or budget by yourself. When you have a spending plan that works well for your family, try everything you could to stick to it. Below are a few suggestions to assist you get your budget started.