Debt can stand between you and your financial goals. Between credit cards, car loans, mortgages and student loans, it's easy to get stuck in a cycle of borrowing. Getting out of it and reaching solid financial footing takes a lot more effort.
Credit cards aren't right for everyone, but used carefully they can help you build credit. The good news is that there are several ways to improve your finances and end the debt cycle for good. Making peace with credit cards means having a clear plan for staying out of debt. Here are a few ideas to consider.
1. Keep Track of What You Spend
If you pay with credit cards, you need to know where your money is going. Overspending is easy, and little purchases add up fast. Many people don’t realize how much those occasional buys cost until they look back over their statements.
Pick a tracking method that works for you. Spending alerts on your card account will tell you when your purchases go past an amount you choose. A spreadsheet, a bullet journal or budgeting software can also help you keep a clearer mental tally of your spending.
2. Find Someone to Keep You Accountable
A trusted family member or a friend who won't judge you can offer perspective on a purchase or on your plan to pay down debt. An accountability partner gives you a sounding board, so you can hear your reasons for a money decision said out loud.
3. Don’t Save Your Card Details Online
The easier it is to pay, the easier it is to spend money you didn't need to. Typing in your payment details for every online order gives you a bit more time to think the purchase over.
4. Use Cash for Some Categories
For spending like eating out or entertainment, put aside real cash to help you stay on budget. Paying with physical money tends to make you more deliberate about what you buy.
5. If You Can’t Afford It Without the Card, Don’t Buy It
One of the biggest dangers of credit cards is the feeling that you can afford things you really can't. A good rule to follow: if you couldn't pay for it in cash, you can't afford it on a card either.
6. Keep an Emergency Fund to Fall Back On
Even $500 set aside for car or home repairs can keep you from sliding into credit card debt. Start small and grow your safety net over time. The ideal is three to six months’ worth of living expenses in a high-yield savings account.
If you've been putting a fixed amount toward creditors each month, keep that habit going but send the money to savings instead.
7. Put Needs Ahead of Wants
Almost every budget has room to trim spending you don't need. That might mean going to your favorite restaurant's "Taco Tuesday" just once a month, or cutting back on online shopping. The more wants you drop in favor of necessities, the stronger your finances will be.
