Budget Basics
Avoiding Credit Card Debt -Preventive Medicine is Best
By Amy L. Cooper-Arnold
CardRatings.com Staff Writer
Avoiding Credit Card Debt — Preventive Medicine is Best
We all know the key to good health begins with a dose of prevention—eat right, exercise
regularly, and get a good night’s sleep. Your financial health is
no different.
By taking a few steps of prevention today, tomorrow your finances will have a clean
bill of health freeing you to live a life of opportunity rather than of difficulty.
Keep the Right Perspective
Much of the problem with credit card debt problems comes from changes in credit
card availability, advertising, and values over the past 75 years. According to
Linda Tucker, Director of Education for Consumer Credit Counseling Service in North
Little Rock, Arkansas, it wasn’t until the 1960s that credit cards started becoming
available to the average consumer. Now today, nearly everyone has access to a credit
card.
Manage your finances
Starting with a strategy will help keep you on track before you ever even pull out
the credit card. According to Tucker the first step is
determining your monthly
income and needed expenses. As part of these monthly expenses, figure in 5-10% of
your income to set aside for emergencies, long range savings such as a retirement
account, and short term savings. If you have some savings then you avoid having
to put large amounts of debt on a credit card in times of a crisis.
Setting up a budget is just the first step; sticking to it is the next, and often
more difficult task.
To help keep you on track set goals and put motivators in place.
Tucker suggests setting a savings goal with a deadline. Savings goals can include emergencies, vacations, cars, and of course don’t forget long range goals such as
retirement. Tucker also says a reward program can be a great motivator as well.
Just keep in mind that whatever you choose as a reward, it shouldn’t compromise
the hard work you’ve done in managing your finances.
Finally, you need to monitor how
much you charge on your card in relation to your
credit limit. You should never charge more than 30-50% of your available limit otherwise
your credit score could go down. For more information on credit scores read our article On the Path to a High Credit Score.
Advertising plays a role too. Howard Dvorkin, author of Credit Hell: How to Dig
out of Debt and founder of Consolidated Credit Counseling Services, an organization
that provides education on debt and a debt management program, says that according to one survey consumers are exposed to 300-400 advertisements every day. Combine
this with a shift from saving for the future and we have a society trying to keep
up with the Jones’ satisfying the desire of the moment. Add the purchasing power
that comes with a credit card and you have the perfect formula for disaster.
But it doesn’t have to be this way. If there’s one thing Dvorkin wants consumers
to know, it’s that you don’t have to be a slave to the credit card company or even
to the seduction of advertising. You can have control over your financial health
without depending on a credit card!
Setting up a budget is not always easy, so if you want some help Consolidated Credit Counseling Services offers free budget counseling. You can also consult your phone book to see if your community has a local office of Consumer Credit Counseling Service.
