When it comes to using your credit card, you may see yourself as credit-card rock star. After all, you always pay on time, and even have a nice credit. When compared to newbie credit card holders, you’ve got the basics of usage right. However, you may be using your credit card too much.
Credit cards are wonderful financial instruments of course. They are handy because they allow you to get instant loans whenever you want. However, this comes at a risk since you need to plan your expenses. You need to repay those loans as well. Taking too much credit in a short time can be risky.
Now, your credit utilization rate may be healthy, but don’t let that make you complacent. There are many elements of financial health, so just because the credit utilization rate is on the safer side, it’ll be prudent not to get complacent.
Here are some danger signs to watch out for so that you can control your spending patterns.
When you are overspending, you are falling behind on your savings goals. For example, you had decided to save Rs. 1,50,000 this year but at the yearend you found that you have Rs. 100000 saved. Similarly, you may be falling behind on saving or your retirement fund, investment plans, and more. Neglecting these things or the long term can put you in a serious financial position.
Always make sure that you are putting money aside for these.
When you are bored, it can be very easy to get on a splurging spree. It can be hard to resist buying things on a whim when you are bored out of your senses. The main problem is, it can be pretty expensive.
This can be especially troublesome later on if you are buying things with a credit card, or even by other forms of EMI. These are purchases you don’t plan for, and these can easily be hard to pay back later without strong budgeting.
Maybe you do have some rules for spending and shopping, even when you don’t have a strict budget. But when you break these rules? You get a lasting guilt feeling. Now, splurging once won’t damage your personal finances, but uncontrolled ones may.
Here are some tips to do just that.
Make a better budget: This does not mean make a complicated budget. Those are not necessarily more effective. Something as simple as a weekly credit card spending rule or limit can be enough. You can also use the 50/30/20 rule. In this, 50% of your net income is for your needs, 30% is for wants, and 20% is debt settlement.
Study credit card statements: Study this, and you may find a pattern to your overspending. Rather than using a credit card, start using a debit card, which is safer in controlling purchases.
Do a temporary spending freeze: If you have a habit of overspending that is harming your finances, try this one. Freeze spending for a week to start with. You can then increase these to month-long freezes.
Use these tips, and you’ll soon be out of your overspending habits.