All year, I've been working on one of my New Year's Resolutions, and trying to get out of the oh-so-easy-to-do habit of putting purchases on the credit card, without even thinking about it. It's so easy to think that a little $20 or $30 purchase is innocent enough not to cause problems. Then you get your credit card statement, and each one of those times you did that has added up to a hundred (or a couple hundred) dollar balance. Ouch.
Let me tell you - that's a hard habit to break! But we are working on it in our family. One of my New Year's resolutions was to pay off debt and save. We haven't been able to save much so far in 2012, but we are certainly working on the paying-off-debt part of that resolution. It's a slow process, and can be very frustrating (especially when things come up and you feel like you're taking 1 step forward and 2 steps back......i.e. surgery on your child), but one step at a time, we'll get there.
I'm no expert, but thought I'd share a few helpful tips at paying off debt and learning to live without using those credit cards for every day purchases.
1) Budget your money! This one seems obvious, but maybe it isn't for some people. Our example: my husband gets paid each Friday, while I get paid on the 15th and 30th of each month. I print off a calendar each month, write down what bills are due on what days. At the bottom of the calendar, I write each day that we get paid. I look ahead and write what bills to pay with each paycheck we get. I factor in that at least a few groceries need to be purchased each week (keep a running list of what's needed), gas needs to be put in the vehicles, and (ideally) a bit needs to be put in savings each paycheck. Other than that, it's basically free money (free as in unassigned, not as in doesn't cost anything - everything costs something!). With this "free" money, we can use it to go out to eat if we want (we don't do a whole lot of that), or we can purchase clothes, "toys," whatever we want. But when it's gone, it's gone.
2) If you don't have the cash for it, you don't need it. Re-read the last sentence of bullet #2. When it's gone, it's gone. If cash has been spent on other things, too bad. It'll have to wait until next paycheck, and it's likely that by the time the next payday rolls around, you will have forgotten about it, or don't need it anymore.
3) Spend cash - as in paper and coin money. This tip is pretty old-fashioned, I'm aware of that. I struggle with it myself. Having paper money means having to go to the bank (my husband's and my jobs only pay in direct deposit anymore), which is just another annoying errand. But it's a good way to allow yourself a specific, budgeted amount of cash to spend each week. Another bonus to this idea is that - if you have young children - it helps teach them how money works. You hand the cashier your money, and you get your goods in return. Your child(ren) see you actually giving up the money. When you swipe your plastic (whether it be debit or credit), you keep the card when you're done. You know that money is gone, but your child doesn't. It's a good teaching tool for both your children and you! We can always learn, remember that!
4) Cut back and learn to be happy with less. This one is obviously challenging. Who doesn't want great stuff? Cutting back can really save some cash though, and lessen the chance that you would feel the need to whip out that credit card for something you didn't really need to begin with. We don't go out to eat much in our family. We have young kids, so it's difficult anyway. But even going to a cheap fast food restaurant costs us around $15 for the four of us. We can feed ourselves at home for less than $5, on a regular basis.
5) Stick those credit cards in a glass of water and put it in the freezer! This one is a bit drastic, but I've done this before! If you just really can't stop yourself from using your credit card, but don't want to cancel it completely (which you can't do if you're carrying a balance anyway), freeze it. Literally. If you're not carrying it with you, you can't use it. If it's in water, you won't be able to see the credit card numbers for online purchases.
6) Be organized and plan ahead for bigger purchases. It's August. I'm half way done with Christmas shopping this year. I started in July and have purchased a few gifts each week or so. All in cash. Another example: we are hosting Thanksgiving this year, and really could use some new furniture before our guests come to stay at our house. So, starting with the last pacheck, we've been putting a little away each week for our couch fund.
7) Define emergencies. Things happen in life. Life is really good at throwing curveballs. Let's say your car breaks down, it's your main, or only, mode of transportation, and getting it fixed isn't even questionable. Well, if you don't have the cash saved up, the credit card is your only option. We specifically define "emergencies" when it comes to money, and I recommend doing that. Running out of diapers isn't an emergency. Yeah, the kid needs them, but that's something I look at when I'm budgeting each week. The water heater going out unexpectedly? Yeah, that one needs attention ASAP.
8) Celebrate the little milestones. The first week we went without putting any new purchases on the credit card, I think I made a cheesecake, or something to that effect. It's a learning process and a lifestyle change. You have every right to be proud of the small steps you're taking, even though they may seem insignificant!
If you're trying to pay off your debt and save money where you can (who isn't!?), then I hope these few little tips can be of help to you. It's a slow and steady process, but