Personal Finance Advice

 It’s easy to fall into the unfortunate habit of using your credit card to make all your purchases.  For many people it starts with using cards in an attempt to build up rewards points through credit card purchases while for other people it begins with needing a little extra money for a purchase.  A lot of people do this quite well from month to month, paying off the balance in full as the payment comes due, but for plenty of people things start to slip when the cardholder decides to make a minimum payment instead of the full balance one month.  Maybe the cardholder has the full intention to catch up in the next month and get everything paid off, but after a few months it becomes apparent that the balance isn’t going to get paid off anytime soon.  At this point, many cardholders just resolve themselves to having debt and make it the norm within their personal finances.

Then again, some people just don’t use credit responsibly.

How do you know if you’re living on credit? It’s one thing to use your cards occasionally, but there is one surefire way to know if you are actually relying too much on your credit.  Think about this: If you suddenly lost access to all your credit cards - meaning you still owed the monthly payments but couldn’t use them for any purchases - would you be able to afford everything you need for the rest of the month?

If the very thought of not having access to your credit cards makes you shudder then there is a pretty good chance that you are living on credit.  When you begin to rely on your credit cards to buy your groceries and fill your gas tank you’re living dangerously.  It means that you are living far beyond your financial capabilities, and this always has a pesky way of catching up with people at the most inopportune times.  If you can’t afford to pay all your bills every month and still put food on the table then it’s time to take a hard look at your finances and figure out ways to stretch your money.  In other words, instead of whipping out your credit card to pay for your groceries you should figure out ways to reduce your food bill enough to where you can pay for your purchases in cash.

“Everyone uses credit,” you argue.  “If the credit is there, why not make use of it?”  There are two important answers to this question:

Credit isn’t guaranteed.  Just because a company extends credit to you does not mean that this credit will be perpetually available.  The company can decide to freeze your account, making the credit inaccessible.  They can also lower your amount of available credit.  If you are already perilously on the edge of losing control of your personal finances then something like this can certainly nudge you over the edge. 

You’re paying too much in interest charges.  When you use credit for everything and carry balances without worry then chances are you’re paying a hefty amount of interest charges every month.  Credit isn’t free.  Think about how much money you could save if you weren’t paying the credit card company money every month for the privilege of keeping the balance floating?

Living on credit is asking for trouble.