It’s a habit you know you shouldn’t have, but once you start living off your credit card float, it can be a challenge to stop. It often starts innocently, with an unexpected expense cropping up a few days before payday. You use your credit card to cover the cost, promising to pay it off after you are paid. The situation can quickly get out of control, and once you face a bill that you cannot pay off in full on the due date, you know you need to rein in your spending. However, now in addition to your normal expenses, you face an expensive bill that is not in your budget.
Fortunately, realizing you have a problem is the first step in coming to a solution. Once you understand how damaging spending more than you make is to your financial health, you can start working on getting your spending under control.
Deal with the Debt
Credit card interest makes it difficult to pay down the principal of your debt. If you are only making the minimum payments, you may find your balance doesn’t budge much from month to month. Paying more than the minimum is one way to pay down your balance, but for quick and money-saving relief, consider taking out a personal loan. Personal loans typically offer a much better interest rate than what is available from credit card providers. Borrowing the money to pay off your balances will leave you with one monthly payment to cover.
With your credit cards zeroed out, you can focus on gaining control of your spending. There are a variety of options available when shopping for personal loans. The process is quick and easy, and you can quickly find the loan that is best for your situation.
Balance Your Budget
Look for areas where you can painlessly cut costs. Spending less at the grocery store or cutting down on entertainment costs can sometimes free up hundreds of dollars a month. However, if you have been managing your spending and still struggle to make ends meet, you may need to look at ways to bring in more income. Whether it is transitioning into a different job with better compensation or taking on a second, part-time position temporarily, bringing in more money is often the best answer to budget woes.
Build an Emergency Fund
Once you go through the stress of dealing with credit card debt, you don’t want to find yourself in that position again. Building up an emergency fund gives you a cushion you can use to pay for unexpected expenses. With money set aside for unplanned spending, you won’t need to rely on your credit cards to handle these costs. If your budget is tight, the thought of setting money aside for savings may seem impossible, but adding even a little money from each paycheck will add up. Set your initial goal to have $500 in a separate savings account.
Once you have that, work towards having $1000. Finally, aim for three months of living expenses. This may seem like something that will take years to build up, but even $500 will be enough to cover unexpected auto or home repairs which would otherwise be on your credit card.