It’s a different world than the one our parents grew up in. Chances are, you opened your first credit card account when you were about 18 or 20 years old, while your dad didn’t have one until he was closer to age 30. Buying on credit is much more common now than it was a generation ago and so is being in debt. More and more young people are graduating from college with significant student loans, $23,000. The average student is also graduating with $3,300 in credit-card debt. Ouch!
But just because you’re caught in the debt cycle now doesn’t mean you have to stay stuck in it forever. Your spending habits have a huge impact on your amount of debt. And a few positive changes can make all the difference. Here’s how to turn bad habits into good ones:
Pay with cash, not credit
With so many persuasive “zero down!” and “no payments for 18 months!” offers out there, it’s tempting to buy now and pay later. The problem is, you really do pay later—usually much more than you planned. Hidden interest rates and fees can add up fast. And paying for things months or even years after you’ve bought them is a sure way to keep you in debt longer than necessary.
Stop buying on impulse or emotion
Let’s face it, buying stuff is fun. And it can make us feel better, temporarily. But purchasing items you don’t really need or haven’t budgeted for can keep you in the debt trap forever. Treat yourself to the things you want, but do it the smart way: Identify what you want in advance and save up for it, week by week, until you can really afford it.
Avoid cash advances
Whether it’s from a paycheck advance or your credit card company, this “easy money” comes at a huge cost—extremely high interest and fees. Stick to your budget and skip them altogether.
Set a budget to know what you can spend
It’s not rocket science. Just make a list of all the expenses you have each month, total it, and subtract the total from your monthly income (check out www.incharge.org for more budgeting advice and handy calculators). The amount you have left is your “disposable income,” meaning the amount you can play with. This should be your source for spending, not credit cards.
Comparison shop
Shop around before you buy. Use the Internet, the newspaper, the telephone, or even your Aunt Edna. Try web sites like www.mysimon.com or www.epinions.com to check prices at different retailers. You could save big!
Quit wasting money unnecessarily
We all have expenses we really don’t need. They can be anything: subscriptions to magazines we don’t read, late fees on videos or DVDs, unwatched cable channels—anything that we could avoid paying for if we just did something about it. Like the ad says: Just do it. Take the videos back on time. Cancel the unread paper. And save some cash.
The bottom line? Don’t spend more. Spend smarter.
Visit www.inCharge.org for more information.
