Friday, 30 August 2019
Maybe you use your credit cards to reward yourself with a splurge, or to cover emergency expenses like car repairs.
At the time, "buy now, pay later" doesn't seem like a big deal. Then the bill comes and you realize you spent more than you thought — and you can't pay the balance off right away.
If you find yourself unable to pay off your balance each month, and you're racking up interest and late fees, it's time to take a serious look at your finances. By determining how and why you are using your credit cards each month, and making some changes, you can get off the slippery slope into unmanageable credit card debt.
Many people have no idea how much money they actually spend each month. Sure, they know what they pay for their rent, utilities, and car. But where the rest of the money goes is often a mystery. However, knowing where your money goes each month is essential to getting control of your finances.
To figure out where your money is going, try keeping a journal of every single cent you spend, whether it's cash, credit, or debit. Even if you put a $1 into a parking meter, write it down.
There are also multiple phone apps and online budgeting programs (many of them are free) to help track your spending. These also make it easy to categorize your purchases — such as groceries, entertainment, health, and dining out — so you can see where your money is going, and where your overspending.
Most experts recommend you track spending for at least a month to get a clear picture of your spending habits.
Now that you know how much is going out each month, compare that to how much is coming in. If more is going out than coming in (and this is why you are using your credit cards), it's time to find places to cut back.
You probably can't make immediate changes to your housing and transportation expenses. But chances are there are other unnecessary expenditures you can eliminate or reduce. For example:
Check out 89 Ways to Save Money for more tips and ideas.
Once you've identified what needs to change, find tactics that work best for you, such as:
Earning more can also help you balance your budget and reduce the need to use credit. Fortunately, in today's gig economy, there are more opportunities than ever to make extra cash, like renting out a room, selling things you don't need, or finding freelance work.
Now that you have analyzed your spending and hopefully found some places to cut back, you need to focus on paying down the debt you've already accumulated. Most financial experts recommend tackling the card with the highest balance first and always paying more than the minimum monthly payment if possible.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates. Links to third party sites are provided for your convenience and do not constitute an endorsement. BBVA USA does not provide, is not responsible for, and does not guarantee the products, services or overall content available at third party sites. These sites may not have the same privacy, security or accessibility standards.
Almost every financial action you take is influenced by your credit score. What does yours look like? Check out these tips to boost your credit score.
Understanding credit cards and figuring out which one is right for you could save you money long term.