Every time you swipe a credit card without intending to pay it off at the end of the month, you’re technically putting yourself into debt. Some people view using credit as “spending money you don’t have.” Don’t put yourself into unnecessary debt.
A good rule of thumb for maintaining good credit is to only use 30 percent or less of your credit card limit. Credit card utilization is one of the factors of your credit score.
Luckily, all of your credit cards are included into your limit which gives you some flexibility in terms of how you spend on each card. If you have a retail credit card with a $300 limit and another credit card with a $700 limit, your total credit limit is $1,000. That means you can spend $300 or less to stay within the 30 percent threshold.
It’s best to pay down your credit card each time you receive a bill. This is the only way to avoid paying added interest, unless you have a special promotional offer. Additionally, when you eliminate your balance, you’re credit utilization gets a clean slate every month. And when you carry over a balance and continue spending on your credit card, you run the risk of maxing out your card or getting awfully close to your limit.
It’ll feel less overwhelming to pay your credit card in small increments as you rather than wait a few months and be faced with a huge balance. The longer you keep your balance, the more interest you’ll pay.
Do you always find yourself in a financial bind? Do you resort to high-interest payday loans, credit cards or borrowing from friends and family? If so, you might want to consider creating a budget.
Creating a budget is a great way to start practicing good spending habits and get your finances back on track. The first step to creating a budget is to calculate your monthly expenses. Be sure to include your fixed expenses, like rent and utility bills, which are guaranteed every month and variable expenses like clothes and shoes, which are not necessary. Once you’ve calculated exactly what you’ll be spending money on, subtract that from your net income. Your net income is the amount you make after taxes.
If the amount you spend outweighs your net income, think of ways to cut back on spending.
Contrary to popular belief, a sale is not a sale for you unless it’s on an item that you actually need and have already budgeted to purchase. For example, if you’ve been in desperate need for a pair of jeans because your favorite pair ripped, it’s great to buy a pair on sale. If you coincidentally find your favorite pair of designer shoes on sale for $150, just keep walking. While the price has been reduced, that’s still $150 you do not need to spend.
You could be putting a dent into your savings by getting distracted by sales.
Saving money, just like beginning a diet, is always easiest when you first start. You’re enthusiastic and optimistic to reach your goal. As you get more comfortable in your routine, you start to think it’s ok to cheat occasionally or just skip out altogether. Don’t cheat yourself out of savings, you can save money automatically by setting up direct deposit to set aside a certain amount of money into your savings account each time you get paid.
With automatic savings you’ll never miss your savings deposit. Once you start missing payments, you might develop a habit and lose focus on your goals. If you ever have a difficult month, just set aside a small amount of what you would normally save. As long as you continue saving, you’ll continue getting closer to your goals.
Let Military Saves help you save money so you can feel confident about your finances. It all starts when you make a commitment to yourself to save. Take the first step today and take the Military Saves pledge to save money, reduce debt, and build wealth over time. And it doesn't stop there. Military Saves will keep you motivated with information, advice, tips, and reminders to help you reach your goal. Think of us as your own personal support system.
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