Tag Archive | "credit cards"

3 Tips That Can Help You Avoid Derailing Your Budget

Here are 3 easy tips that you can use to make sure that your family budget isn’t derailed. Don’t worry, these are NOT very hard to implement and you can start today. The reason you really want to think about this is because creating a budget is only half the battle. Most people are capable of putting together a basic family budget. The hard part is when you run into day-to-day situations that can put your commitment to sticking to the budget to the test.

1) Make sure you have some money put away for emergency situations.

This might take a little while to get set into place, but it’s really important that you set aside some money for emergency situations. Look, it’s a fact of life. Sometimes things will arise that are unexpected. For example, you might suddenly start experiencing car problems. You take it into the repair shop, and are quoted a couple hundred dollars to get it fixed. This ordinarily would break a family budget — but not if you have some money set aside to deal with situations like this.

2) Never go shopping without having a clear idea of what you’re going to buy.

The last thing you want to do is go shopping with only a vague idea of what it is that you need to get. That’s the last thing you want to do. Why? It’s far too easy to buy things that aren’t really even necessary or that you had no intention of purchasing. How often have we gone to a store and suddenly spotted something that caught our interest. Before long, we’ve added it to our shopping cart. This adds up and can bust a family budget easily.

3) Don’t treat your credit cards as being a source of “free cash.”

This is a biggie. The last thing you want to do treat your credit cards as a source of “free” cash. This is a recipe for disaster. You need to make sure that any purchases that you make on your credit card are within your budget. However, a lot of families often find it far too tempting to charge things without really thinking about whether or not it’s a necessary expenditure.

If you heed this advice, you’re more likely to stick to your family budget and to avoid doing the things that can derail it.

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How To Keep Track Of Family Spending Without Being Obnoxious

There’s a fine line between keeping track of the money that your family is spending and becoming an obnoxious jerk about it. You’re not going to be very popular in your family if you follow everyone around with a notebook and pen jotting down all of the expenditures that are being made. Not only will it seem very crass, bu it will really take a lot of fun out of things that should be enjoyable. There’s a better approach.

We know it’s important that we keep track of where the money is going. We can’t just spend recklessly and blindly without accounting for where funds are flowing. So how do we track expenditures without being obnoxious about it?

Think about how how many of us make purchases. We either use a check, or we use a credit card. While it’s true that we sometimes use cash, that cash often comes straight from a bank checking account or savings account. You’ll see how you can track the cash in a moment. But let’s initially turn our attention to credit cards and checks.

Do you literally have to be standing over someone’s shoulder looking to see who they’re writing a check to at the moment the check is being drafted? How about when someone is making a credit card purchase? Do you literally have to be right there monitoring what the money is being spent on? See, this is what would make people feel a bit uncomfortable. Doing things like this would be obnoxious — and they’re completely unnecessary.

You can easily audit checking accounts at the end of the month and even look at the checkbook to see where the checks were made out to — assuming accurate records are kept, which they usually are. Credit cards are laughably simple to monitor. Every purchase results in a line-item entry when you get your monthly statement.

This brings us to cash. How can you monitor that? While it’s not as easily monitored, you can at least get a general sense of how much cash has been spent based on ATM transaction notices that are listed on your banking statements.

By following this advice, you can accurately monitor expenditures without being obnoxious about it. It’s not as hard as it might initially seem!

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When Does A Credit Card Become A Liability Instead Of A Lifeline?

Credit cards are the ultimate double edged sword that can be both a lifeline and a major liability. From a family budgeting perspective, you’re dealing with dynamite. You really need to have a clear understanding of what role credit cards will play in your family finances. For some people, they’ll merely be devices through which to facilitate transactions without needing to have cash. Presuming the balance is payed off at the end of the month, this is a perfectly legitimate way to use a credit card. It’s acting as a lifeline by facilitating everyday transactions.

However, for far too many people, credit cards become a major liability. Families will sometimes have a slew of unexpected expenses (or sometimes even regular expenses) that arise. How are these things paid for? With credit cards. But then, at the end of the month, a balance reminds. As a result, the credit card company starts to charge interest. This can quickly add up, to the point where — if you’re not careful — you could end up with a significant long-term liability that will simply linger for years and years.

The secret is to be extremely disciplined with how you and your family choose to use credit cards. It’s okay for them to be there as a genuine lifeline and as a mechanism through which to facilitate shopping transactions. Where it starts to become a real problem is when you notice that a lot of un-budgeted discretionary spending is taking place. This is a sure-fire way to run up a massive amount of debt in a relatively short amount of time. At this point, the credit card ceases to be a lifeline and truly becomes a liability.

Here’s the bottom line: credit cards do not provide you and your family with “free” money — it all comes with some very hefty strings attached. Between the high interest and the potential for additional fees, the overall approach that many experts recommend is that you attempt to minimize your usage of credit cards. Don’t ever let yourself be fall into the trap of believing that it’s easy to pay off credit card debt…. it’s not! So be smart, and make good decisions.

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