If you have a habit of spending lot on credit cards then there is a higher chance that it may lead you to a serious situation of high credit card debt. The early you realise is better for yourself. Even if you are already trapped in such situation then at least you should work on it to rectify & make things better for future. Well! You may argue saying that, “whatever I spend, I always pay them by the following month or by the due date”. That’s good! But have you looked backed, what else have you done with your monthly surplus so far apart from repaying the dues?
If you are earning Rs. 1,00,000 per month, but have Rs. 1,20,000 in credit card debt, then you have been spending too much. Your monthly income should always be higher so you can make those credit card payments in full along with all of your other debts and financial responsibilities. In this blog post, I will share with you five tips how you can stop overspending on credits cards. Here you go..
It’s Your Credit Limit (not Your Bank Balance): You need to realise that the credit limit you have got is not your bank balance that you keep on spending until it’s over. Having a high credit limit isn’t the same as having a lot of money in the bank. Credit limit doesn’t add anything to your net worth, but of course reduces it the moment you start spending on it. Do not forget this.
Only Buy if you Need it, but not just you can Buy it: You need to understand the difference between “I can afford it” & “I can buy it”. If you can afford it, then there may not be any change in your life style and you may not feel the pinch of spending done over it, but in the latter case, you can buy it either through cash or via debt. Buying on debt further puts you in a situation of repaying it. Before you realise and ask yourself “why did I buy it?”, you better get a sense whether you are going to afford it or not.
Plan & then Spend (not the Reverse): Make sure, you avoid temptation & focus on what you need to buy on your credit card that fulfills your need. Seriously there is no literal gains if someone else is envying on what you have bought. This attitude only leads you in debt trap or struggle of repaying because you have bought it. Before stepping foot into a store or making an online purchase, make a list of all the items you intend to purchase and stick to it. If you do not do this, then you might end up buying something unwanted and miss out to buy what was required.
Do not just Flaunt the Cards Everywhere: If you are trying to put a check on your spending then you need to first stop using the credit card everywhere. Many a time, just for the sake of show off you end up spending for no reason, isn’t it? For this matter, keep your credit card at home. This means that your card is not available when you see something you are tempted to purchase. This also means you will be in a better place to keep a tight control of all spending on the card.
Keep Emergency Funds always Intact: It’s a fact that in maximum cases, credit cards are spent on emergency needs. So you need to plan for an emergency fund creation via monthly bank RDs or Liquid fund SIPs. It is always advisable to maintain at least two to three monthly expenditures in liquid form either at bank or in some safe investment to make it available at any given point of time.
You can also choose some crazy ideas to stop the habit of overspending. Like, give your card to someone you love & trust, whom you consider your well-wisher or mentor. The hesitation of asking the card back frequently may help you reducing the purchases. Even you may delete card information from eCommerce sites which otherwise makes transactions easy with few clicks. Starting all again adding card details, further OTP confirmations etc. might be irritating sometimes. This irritation will help to curb impulse purchases. Even if you are eligible for higher limit then it is in your best interest to reject it else there is a chance you will spend more than you can comfortably afford to cover each month.
Anyways, you can’t completely change the habit of spending overnight, but realising it and making a commitment is a great step toward minimising the spends beyond your needs. You will lead a much happier life if you take control of your spending, instead of letting your spending take control of you.