I love to shop. Instant gratification is my thing. The problem is that I have only one salary, so it's not always easy to feed all my indulgences. I, therefore, take to different ways to manage my cash flow and find myself turning to my credit card often.
Of late, I have come to realise that I was spending more money than I could afford to, because of the sheer convenience of having a credit card, or multiple ones. I was spending money before I had even earned it.
I decided to address this troubling situation and put a leash on my habits. I have come up with a personal strategy to achieve this and would like to share these tips with you, as well.
#1. Divide your expenses:
Firstly, I have started to divide my expenses across the diverse instruments of spending, such as:
a. Using petty cash for small indulgences like an impulsive coffee plan with friends after dinner on a Monday.
b. Using net banking to pay off bills every month and also to fund my Digital Wallet – mainly to pay for my cab rides.
c. Using a debit card for big expenses such as buying an expensive dinner with friends.
d. Finally, I would use my credit card only for small transactions, when I do not have any cash with me, such as retail therapy, grocery shopping or the occasional fast food indulgence.
This helps me automatically minimise the loan that I am taking through my credit card. Now, I try my level best to ensure that my monthly credit card bill does not exceed 10% of my take home salary.
#2. Maintain only one credit card and choose it wisely:
I gave up a credit card to ensure that I only have and use ONE credit card. My friends' experiences with multiple credit cards have been akin to horror stories about aninsane amount of credit card debt in addition to education loans.
One of the major advantages of credit cards over debit cardsis the benefits they bring, in the form of bonus points and cashback options. Before I chose my one card, I read through these advantages carefully. You should opt for a credit card which gives you considerable saving options on the type of expense you have.
#3. Auto Pay:
I now use autopay or auto debit option for my card bill. I am subconsciously aware that my bank account will be hit on a certain date every month, and I have to maintain the appropriate balance, to keep the payment from failing. The auto debit also save me the task of paying the bill manually.
Sometimes, it is better to have external factors control us, especially if you lack internal discipline. It happens to the best of us!
#4. Pay the full amount, not the minimum due amount:
I have always paid the full amount but very often, I come across friends, who pay the minimum due amount every month. This is when they accidentally enter into the vicious debt-cycle. 3% a month, becomes (3*12) 36% per annum, which is an exorbitant sum!
I saved myself the burden of unwanted debt, and you should too - take to more disciplined spending.