Getting credits for the use of goods and services is very easy. Go to a shop, choose which things would you buy, go to the cashier, swipe your credit card, and you’re good to go. By the next day, you still need to buy your supplies for the following day. You do the same process. You go to a shop, choose the things you want to buy, you turn to the cashier, you give your credit card, cashier swipes the card and the you’re good to go again.
After a week of working, you decided to relax, so you went out for a spa. Good thing you have your credit card. Then, your favorite American Idol contender won the contest, so you decided to give yourself a treat. Good thing your have your credit. By the end of the month, you finally decided to check your bills and you now see the list of the debts from the use of your credit card. You feel a little bit warmth on your stomach, and just a moment after, the debt collector knock on your door, and just right after that, you received a phone telling you about your monthly payment for your mortgage. Now, you won’t ever dare to think that it’s a good thing you still have your credit card.
True, getting credits for the use goods and services is really easy. But it doesn’t mean that just because it is easy, it is also good! In fact, the handiness of using credit cards is just another way of saying that getting more debts is as easy as counting one, two, three. Wake up, use your common sense; using credit cards is no different from getting a loan. The money spent on your use of consumer cards is not your money so why spend like as if it yours?
If you want to have a debt-free life, start by paying off the most discretionary debt that you have: your consumer card balance. Do this by using your discretionary income to pay off your credit card balances. You can compute your discretionary income by listing all of the expenses that are beyond your control. Include in there your monthly bills, mortgages, and car loans. Subtract all these expenses from your monthly income and you get your discretionary income (take note of the deduction from your taxes).
After that, allocate a portion of your discretionary income to pay your consumer card balance with the greatest interest rate. For example, if you’ve decided to allocate $200 of your monthly discretionary income and you have two credit cards, one whose interest rate is 20% and the other is 15%, then you should first use the $200 dollars to pay for the one with the 20% interest rate.
After reducing your first credit card balance into zero, you can then allocate the $200 for the one with the 15% interest rate. This may take several months or years to complete, but with determination and discipline, you will be sure to reduce your debts into zero. And don’t forget, never use your consumer cards for daily purchases; always use cold cash for them.