Master Your Card

Here at Master Your Card we talk a lot about budgets and something we mention whenever budgets come up is ‘trimming the fat’ to help you save money. What we don’t do is give you some ideas on WHAT to trim. There’s the standard issue “cut the trips to Starbucks” that everyone mentions, but let’s face it, sometimes you need to cut more than that. So, here’s a list of seven things you can cut and trim from your budget.

# 1 - Luxuries

This one definitely includes things like going to Starbucks, but that’s not the only one to consider. This also includes giving up name brands when generic will do. I realize this will start a bit of a debate, but I didn’t say EVERYTHING had to be generic. I am one of those who refuses to eat generic cereal because I can taste the difference. In this instance, generic simply won’t do. However, here’s a few of the store-brand items I’ll buy to save a few bucks!

- Dairy (eggs, milk, etc.)

- Sugar

- Paper Products (except tp, this is Charmin all the way for me)

- Hand soap

You can also ditch the name brand clothes, too. Or, if you really must have the logo stitched in, check out thrift and second hand shops.

Other luxuries you can do without are the big gas guzzlers or fancy cars that you don’t need. Sell them and get a practical car. Use the money you save in car payments and gas to put towards your debt.

There are some luxuries that are hard to give up for many people. I have a client that’s very into her appearance and absolutely will not give up her manicure/pedicure’s, brow waxes, and facials. She says that these things make her feel better about herself which allows her to do a better job at work. I say that’s a psychological thing, but if it works it works. She’s had three promotions within a year - even in this economy. But, she recognized the need to make some changes so here’s what I told her.

Instead of cutting them out completely, trying altering the frequency. She goes every two weeks for the manicure, pedicure, and brow wax and then every month for a facial. I told her that she could probably go once a month for the pedicure and brow wax (she has fine, light hair so it’s not visible). During the winter she doesn’t wear open-toed shoes so it’s really a waste anyway. And her brows don’t need the waxing every two weeks. As for facials, since those are recommended every six to eight weeks, she could go every two months and that would save her some money. I also told her that she could do facials at home to save even more.

Other luxuries my clients have given up are personal trainers, hair stylists, massage therapists, pet sitters, and maid services. In any event, if your budget is overloaded with expenses in this category, it may be time to consider cutting some and trimming others.

# 2 - Quit the Gym

Here’s the thing. Gym memberships are expensive and while health is important, exercise is free so it shouldn’t be something you have to factor into your budget. Grab a friend and go hiking, biking, walking, or running. All involve exercise and they’re all free.

The branch I work at for the credit union is an all girls branch. Naturally, we’re all worried about our weight and with the new year coming our way, it’s at the top of our personal new year’s resolutions. But, none of us really wanted to do the gym membership because it’s a waste of money - we never went anyway. Instead, we got online and discovered there is a half-a-marathon just for women and we get a half day at the spa for running it. So, we printed out the recommended training schedule and begin our training regiment next week. Since we’re doing it together, we’re more likely to stick to it. And the best part is that none of us are wasting money on a gym membership.

Maybe running isn’t your thing. Try joining a local sports league and get involved with them. Or, if there aren’t any official leagues, find some like-minded sports groups to just get out and play with. Check out Meetup.com for groups in your area. The existing groups are free unless the organizer asks for donations and even then it’s not much but a couple of dollars.

If you really just feel more comfortable with the gym environment, consider befriending a person who lives in an apartment complex. Apartment complexes have their own exercise rooms and they’re free to residents. Residents can also bring in a guest for free, so you get the benefits of the gym without the money.

# 3 - Trim the Grocery Bill

One of our biggest expenses is the grocery bill and when you’ve got a house full of people, trimming the bill can be difficult. Here are a few things that can help with that.

- Clip coupons.

You can clip coupons from the Sunday paper or you can print them from online for free. Either way, it’s in your best interest to check out the coupons each week. Don’t forget in-store coupons either. Sometimes you can get the weekly advertisements that lists the coupons, or - like my store - they have a big peg board with them on there as you walk in. I go to the grocery store once a week just to look at the board and see what coupons they have. It’s on my way home, so it’s not out of the way or anything.

- Choose cheaper meals that go further.

Steak and potatoes, while an excellent meal, is pretty expensive and doesn’t go a long way. To really get more bang for your buck, find meals that are inexpensive to make and last a while on the left-over front. Sometimes you can just freeze things and pull them out later. Winter is an excellent time for this because you can make all kinds of soups, chili, spaghetti, etc. These are also pretty quick and easy to make, as well.

For those of you who don’t like regular spaghetti, try this chicken variation:

Boil chicken until it is almost cooked. Transfer the chicken to a crock pot and then pour cream of chicken soup over it. Add salt and pepper to taste (I also add a little Cajun seasoning for extra flavoring). Cook on medium (low for those with only two settings) heat for 20 min. While that’s cooking, boil the water for noodles. Cook spaghetti noodles like normal. When finished, drain. Add butter and garlic to noodles. Chicken should also be ready. Stir. Cover noodles with chicken and sauce.

- Reduce how much you’re eating out.

Some of the reason our food bill seems so high is that we eat out a lot and then much of the food we’ve bought from the store goes to waste. If you want to trim your bill, the best thing to do is watch how much you eat out. The trick to this is to keep some quick and easy ideas and meals on hand. Most of my eating out is that I’m too tired to cook. If I have something at home that’s easy to throw in, I’ll do that. If everything I have requires me to cook, then I’ll go out.

Also, make your lunch and take it to work. Lunch during the week is a big expense for a lot of us. The easiest thing to do is set a little aside from dinner as your lunch. But, if you’re not into repeats like that, then make your lunch at night. Trying to get up in the morning to do it will, nine times out of 10, result in you deciding to just grab something at lunch time.

If making your lunch isn’t something you think about, then take stuff to work to make lunch with. My office has an entire kitchen area. Every week I take stuff for my lunch meals into work with me. I’ll have lunch meat, cheese, mayo, bread, sometimes lettuce and tomato, and chips. Having that already at the office has made my brown bag lunches even easier. It’s just something to consider.

# 4 - Slash the Cable Bill

For me, the decision to get rid of cable was one of the best I’ve made. I actually get more done now. But, many people don’t want to part with their cable - especially if they’ve completely cut entertainment from their budget. Fine. Like I said at the beginning of this, trimming the fat doesn’t necessarily mean you have to get rid of everything. But, getting rid of the excess is a good idea.

Take a look at what you have. If you have a premium package with 30 movie channels you never watch, what do you need that for? Simplify what you have. Look at the packages available with your carrier, as well as with competitors (provided you can use a different carrier). Use competitor pricing to your advantage. Also, get rid of the DVR. You’re paying extra for something you don’t need, has limits on how many shows you can record, and half of them you’ll probably delete anyway. Most shows are online. If you must have cable, compromise by watching the shows you’ve missed online instead of paying for DVR.

Note: This is just a recommendation. Ultimately you will do what you want to, but I’m offering ideas on ways to help cut the budget. Don’t eat me for this suggestion!

# 5 - Cut Down on Electric and Water

Turn off the lights when you leave a room. Use CFLs instead of regular light bulbs. Use power strips that you can easily switch off when you leave. Take shorter showers. Rinse dishes all at once instead of individually. Turn off the water when brushing your teeth. Wash and dry bigger loads so that you get more done with less energy and water. These are some simple and easy ways to help cut the cost of these bills. If you’re consistent with them, you can count on the savings every month.

# 6 - Save on Landlines

With everyone including toddlers now owning cell phones, there’s not much reason to have a home phone. There’s all sorts of taxes and fees associated with them that you’re already having to pay on your cell phone bill, so why duplicate the two? For those of you whose argument is “for emergencies only,” try cutting back on what you have. If it’s for emergencies, do you really need voicemail, caller id, and long distance? Probably not.

# 7 - Carpool and Public Transportation

Save money by carpooling, whether it be with a spouse or with a group. Or, take public transportation. In either case, you’ll save money on gas and the normal ‘wear and tear’ on your car, plus you’re helping the environment.

What are some other painless ways to trim the budget?

When I sat down to actually write this article, my intention was to come up with the top 5 biggest f*ups of 2008, but the reality is that it was too hard to go with just 5. What I thought we’d do instead is just list some and then you guys add comments on your favorites at the end.

So, here we go. In no particular order, here are some top financial f*ups of 2008.

# 1 - Subprime lending mess

You guys remember this, don’t you? I mean, it’s only the cause of all of our problems in 2008. If I were able to actually make a top 10 list, this would have been in it. Who would have thought that when home values dropped and adjustable rates went through the roof that people wouldn’t be able to afford their houses anymore? I mean, the only indication was that they couldn’t afford it when they filled out their applications to begin with, but that was barely noticeable! Gee, we were just trying to help people achieve the American Dream…too bad that dream was effectively flushed down the toilet and left thousands without homes.

# 2 - Credit crisis

This was a direct spin-off of the subprime mess. Basically, creditors dried up their wells for fear of consumer default and the result was more strain on a weakening economy. In truth, the banks probably didn’t have a choice. I mean, with all of their assets tied up in mortgage-backed securities and those going down the crapper, they didn’t really have money to lend….which leads us to number 3.

# 3 - 25 banks fail in 2008

Ok, so not the 70 banks per year of the Great Depression, but this is still a fairly high number. And, if you take into account the fact that the government safe-guarded against bank failures BECAUSE of the Great Depression, and we still lost 25 banks this year, that’s pretty depressing. Fortunately, deposits are guaranteed these days so people didn’t outright lose their money - not everyone anyway. Even still, the number of bank failures back-to-back caused an insolvency scare for the FDIC where they made immediate plans to set up a line of credit with the Treasury.

# 4 - Bernanke and Paulson

The dynamic dummies had a lot of f*ups this year, but my favorite is when they agreed to let big investment banks on Wall Street borrow up to $200 billion in Treasury securities in exchange for the mortgage-backed securities as collateral. To give you an idea of how stupid this move was, accepting the tainted mortgage loans at face value is the equivalent of handing out home equity loans to people whose mortgage’s tanked, yet basing the loan on the equity they had BEFORE the prices fell. ‘Cause that’s financially smart.

# 5 - Yahoo and Microsoft

I didn’t get into this one a whole lot because I don’t own stock in either company. But, if I had owned stock in Yahoo, I’d have been pretty mad when the deal for $45 billion fell through, and then Yahoo’s stock prices plummeted. It occurs to me that Yang did not take care of his stockholders on that one and he should have been fired before they let him resign.

#6 - The Fed let Lehman Fail…then lent it $138B

It was pretty much standard practice to let investment firms fall this year, but Lehman had bigger ripples then even the Fed anticipated. First they refused to bail them out, then when Lehman failed, they lent them $138B by way of J.P. Morgan Chase as a means to “facilitate an orderly wind-down of Lehman’s broker-dealer operations.” Whatever. I’m inclined to think that the Fed knew they f*ed up big time and were trying to cover themselves.

# 7 - $4 /gallon gas prices

This fiasco was the culmination of a lot of things from the economy to floods, fires, and refineries exploding. But make no mistake, OPEC has a lot of control over how oil goes in the market and they’ve been widely criticized for it. There could have been more control over the gas prices but someone was cashing in.

# 8 - $700 billion bailout

Oh yes, this monstrosity definitely belongs in the top 10. While the bailout itself wasn’t an issue for me - I knew it needed to happen - I think the government jumped in much too quickly without setting proper guidelines. It disgusts me that banks like Chase, Bank of America, and Capital One - who didn’t need the money to begin with - were forced to take their $25 billion share. And since it wasn’t needed, they’re using it to buy other banks. That wasn’t the intended purpose and I blame the government for that. That meal ticket should have come with heavier regulations!

# 9 - AIG

And speaking of heavier regulations, wtf? Pardon me, but I still can’t believe these yahoo’s got away with their little stunt. Ok, they got a little slap on the wrist, but it was light compared with what should have happened. If you missed it, AIG took their top executives - the same ones that ran the company into the ground and the reason they were begging for a bailout - on a $400,000 spa vacation. It was an extravagant vacation as they spent something like $20,000 in spa treatments and $200,000 in room service. Yup, definitely a financial f*up!

# 10 - GM, Ford, and Chrysler

In a classic arrogant CEO move, the three CEOs for these firms took separate jets from Detroit to Washington on the eve of their plea for “The Big Three’s” bailout. I mean really, you expect sympathy and money from an already overextended government when you’re still trying to live in the lap of luxury? Security measure my foot! And don’t even get me started on that $1 salary business. Good grief!

# 11 - Bernard Madoff

One of the most revered names on Wall Street, Madoff was arrested for allegedly running a $50 billion “Ponzi scheme.” Basically, he was paying investor returns from the money of new investors rather than from profit. There’s no actual business going on there. At any rate, his case ranks has one of the biggest fraud cases and he may not have been caught for some time except that he confessed to a couple of employees. I’d really like to know what he was thinking from the time he started this hoax to the moment he confessed.

Ok, so there’s my list of financial goofs this year. What are some of your favorites and how do you feel about those on my list?

If you haven’t noticed, I like to read about other people’s financial journeys because I’m always curious to see how people cope and what they did to reduce their debt. Sometimes I’m fortunate enough for it to inspire a post. Today’s post came from an article I found while trolling the PF sites.

The author gives 10 things the majority of people will experience on their road to being debt free. It’s a great list and I can personally attest to the feelings. So, I figured I’d give you an idea of what I went through when I decided I’d had enough of my debt.

1.) I started my journey with a sense of enthusiasm and determination.

I sat down one day and told myself I’d had enough of living paycheck to paycheck and I wanted an out. I cherry-picked a few websites and read up on debt reduction and found myself a budget worksheet so I could sit down and make a budget. I questioned what I had been doing wrong and how I could avoid getting back to that place. I made plans and lists for my goals and what I wanted after I was debt free. I got myself excited at the prospect of living my own life with money that belonged to me.

2.) I learned to sacrifice.

It’s not easy, I’ve written on this before. I’ve recently had to tighten the belt again because I’ve lost money and, well I’m not in the most stable industry. Not that I think I’m going to lose my job, but I like to have a Plan B, just in case. But, when I made the decision to get out of debt, I did a lot of sacrificing. I cut fast food and dining out, cold turkey. I cooked at home every night. I made the mistake of cutting out all of my fun - I don’t recommend this because it can backfire and everyone needs a little release every now and again. I also gave up buying any DVDs. It was a lot of money that I could put towards my debt. I’ve said it before, sacrificing is hard to do!

3.) I really learned to hate certain cheap foods.

Along with sacrificing eating out, I sacrificed the more expensive foods to cook at home. I ate a lot of hot dogs, Ramen noodles, and PB&J. I was so sick of them that it was literally years before I could even stomach the smell of any of them. I don’t necessarily recommend that you do that, either. But as I said, I was pretty committed to knocking out my debt.

4.) Just when things started going well, I had an emergency.

It never fails, really. Just when things seem to be going according to plan, something always comes along to screw it up. It’s just nature’s way of making sure we really want to achieve that goal, but it sucks nonetheless. So, as I was just starting to get into a groove with my debt repayment plan, I had a major problem with the clunker I owned at the time. Apparently, the vehicle had been in an accident prior to my ownership and the driver’s side L-frame was a different size than the passenger size L-frame. Basically, the car was off balance and a too sharp turn trying to avoid some idiot from hitting me flipped me into a ditch. So, long story short, I needed a new car which also meant more debt. Grrrr.

5.) I wanted to quit.

It was the first time in my life that I had considered quitting something I had seriously been committed to. I was discouraged and confused about where my plans had gone wrong. I had to learn that there were things beyond my control, and no amount of planning was going to fix that. Still, my motivation was gone.

6.) I decided to press on.

After a lot of pep talks and nagging parents, I was able to put myself back on track with my debt plan. But, I realized that I needed to put a little fun back in the budget because having no outlet made the disappointment of a setback even worse. So, I reworked the budget and added a little fun. I’d been so deprived that I went a little overboard, but I was able to recover fairly quickly. I moved forward with my plan and found my groove again.

7.) I found new ways to create income.

I become a mystery shopper for a while, I house sat, walked dogs, delivered groceries to the elderly, whatever little odd and end job I could find. That money went towards my debt and helped me chisel away the burden that much quicker.

8.) When I could see the finish line, I started making plans to celebrate.

I promised myself that when I was debt free I was going to have the best steak and lobster dinner money could buy. Ironic because I don’t like lobster…I just substituted the crab. The point is, I had something in mind to reward myself for my efforts.

9.) Once I made that final payment and saw it clear my account, I lost it!

I’m not going to lie…I acted a fool! I ran around the house screaming and yelling. I burned all the of the credit card bills from my previous debt, one by one, and had some choice words for each of the burning pieces that fell away. I went out to celebrate with my friends (the planned event from number eight!). It was great, my friends and I went to the restaurant and someone told the waiter that we were celebrating my being debt free. I won’t repeat the details, let’s just say I’m pretty sure I didn’t motivate anyone to let the staff know they were also debt free, even if they got free dessert out of the deal.

10.) I promised to never put myself in that situation again!

I even followed that up with a few self-death threats…kidding! Sort of. But truthfully, you feel so relieved at that point that you can’t think of anything but how you DON’T want to go through that again. At the same time, you’re thankful that you made it through in one piece.

Ok, so those of you who’ve pulled yourself out from under mounds of debt, how do you think these 10 things compare with your journey? Did you experience different emotions and processes?

It’s pretty clear that America has a debt problem. Irrespective of the media’s recent recession coverage, Americans have been spiraling out of financial control for some time. Debt is increasing and savings numbers have been negative for the last decade. Now, if you display one or two of these warnings, that doesn’t necessarily mean that you’re addicted to debt; however, it could lead to addiction if left unchecked. But, if you, like many Americans, have all 10 tendencies, then I suggest you seek professional help because you’re probably in real financial trouble.

With that in mind, let’s look at 10 warning signs that could mean you’re addicted to debt, and make no mistake, there are those out there who are.

# 1 - Unsure of your financial state

If you have no idea what’s in your account, what your interest rates are, or where you stand with retirement income you definitely fall into this category. Not having a plan for your finances could mean that you’re in denial about your situation. And like most other addictions, admitting there’s a problem is the first step. Getting your finances in order would be the second.

# 2 - Terrible savings habits

If you don’t even have a savings account, I’m genuinely worried. But, if you do and you’re NOT saving, you should be. This includes planning for recurring expenses like taxes or daycare (if you have them). If you’re not planning for these things and then habitually act surprised when they come around, you have a problem. If this recession has taught people anything (besides that big banks are the spawn of all evil), hopefully it’s that we need to be saving for a rainy day.

# 3 - Shop-a-holic

Here’s another rehab and anonymous group we need. If you shop when your happy, bored, sad, depressed, or any other emotional state you can think of, then you have a problem. Habitual shopping for things you don’t even want, or need for that matter, just leads to a shortage of money and a pile of useless junk. I’m not talking about your needs-based shopping folks. I’m talking about those people who wander from store to store, picking up whatever strikes their fancy. Step away from the stores and give yourself a 24-hour cooling off period. You’ll be surprised how much less “stuff” you have.

# 4 - Always buying on credit

Ok, this one alone isn’t all negative. I use credit for everything just to get the points, but then I pay it off at the end of the month. If that’s your pattern, then fine. But what I’m talking about here are those who buy useless junk on their credit cards with no intention of paying it back at the end of the month. If you think nothing of whipping out a credit card to purchase what you want, right now, then you may have a debt addiction.

# 5 - Using credit to pay off credit

If you’re having to use one credit card to pay off the other every month, then you’ve got some financial troubles and need to reevaluate your situation. There are plenty of people who don’t pay off their balances every month but are working to that end. However, if you’ve got a nice game of ’round robin’ going on, your intention is to clear enough off of one card to allow you to spend on another. That’s an addiction, like a crack addict trying to figure out where their next fix is coming from.

# 6 - Living paycheck to paycheck

This is another that, by itself, isn’t completely telling. This could be due to a lack of financial education. Someone may not know how to budget, etc. But, for those where this is just one in a long line of warning signs, it’s a pretty good one to take into consideration. Living paycheck to paycheck usually means that you have no savings and no plans to establish one, and if we were to look into your finances, we’d find you probably don’t have a clue what’s going on. See the pattern? Most of these signs build on one another. So, if you don’t have a savings plan in place and you’re living paycheck to paycheck, start paying attention because you may have an addiction. And like any other addiction, getting rid of debt is tough.

# 7 - Spending just to spend

This is in line with number three, shop-a-holic, but goes beyond just emotional shopping. This is the junkie getting their fix. This is where people spend money because that’s what they’ve always done. It makes them nervous or anxious when they don’t spend. Extra money burns a whole in their pocket. If you get a Christmas bonus and instead of saving it, you blow it just because you feel like you should, then you’re spending just to spend. You’re getting your fix.

# 8 - Buying more house or car than you need

Both are fairly large debt payments and if you’ve got an addiction, you may not even think twice about it. Spending money comes naturally and since you live in the moment, you buy what you want now, not what’s economical for your situation. People are constantly doing this and it’s one of the reasons we’re in the mess we’re in - not that it’s all their fault, but there is a level of responsibility to our debt addicts as well. If you’re just starting out, a smaller house may be more practical. A hybrid may be a better option than a hummer. Living beyond your means will keep you in debt and your constant decisions to do so are a big red flag that you’re an addict.

# 9 - Borrowing more money to pay the money you already owe

This sign isn’t about those who consolidate their debt as part of a “debt reduction” plan. No, this refers to those who live in a continuous cycle of borrowing to cover their borrowing. Those who will borrow to pay down their credit cards, but then run them up again, and borrow more to pay them down yet again. This is a vicious cycle that is difficult to maintain, and definitely one that will catch up with you before long. If you’re doing this, STOP. I don’t know who you are, but I’d be willing to put money on the fact that it’s affecting your health, your relationships, and your job performance, none of which is going in a positive direction. Seek help and end the cycle.

# 10 - An uncontrollable urge to keep up with the Joneses

And last but not least, if you have the overwhelming feeling of materially one-upping your friends, family, coworkers, or neighbors then you’ve got a complex known as ‘keeping up with the Joneses.’ This condition is causing you serious financial distress and may be affecting your ability to be reasonable about your finances and your addiction to debt. If you feel yourself in this position, the best thing to do is take stock of what is important in your life and worry about that, not what trinket or gadget your neighbors just picked up. The reality is, the Joneses are probably in the same boat as you and may even think of you as the a Jones they‘re trying to keep up with. There’s some food for thought.

Ok, so this article is a little ‘tongue in cheek,’ but the signs are real enough. If you can relate to several on the list, you may have a problem with debt and it’s best to nip it in the bud before it gets out of hand. If you don’t exhibit any of these warning signs, then you’re well on your way to being financially secure.

What other warning signs do debt addicts display? How do you rate on a scale of 1 to 10, 1 being ‘not an addict at all’ and 10 being ‘a complete debt addict?’ You don’t have to answer that here, of course, but at least be honest with yourself.

This is a guest post by Andy over at Retire at 40. Check out his great blog and subscribe to his RSS feed here.

I’ll admit it. I’m a credit card user. I use it a lot, not everyday, but a lot. Am I wrong? Am I a bad person? Should I be slapped with a wet haddock for my sins?

The answer is of course ‘no’. There are multiple ways why you’re not an automatically bad person if you use a credit card but you must follow them. These tips broadly fit into three categories so we’ll look at each of these in turn:

(1) Using Your Credit Card the Right Way, (2) Using Your Credit Card to Your Advantage,
and (3) Using Your Credit Card Within Reason.

Pay off your Credit Card in Full Every Month no Matter What

Without a doubt, this is the most important thing you can do with your credit card. Even if you don’t read the rest of the article (please do) be sure to take this tip in your back pocket everywhere you go. It’s the first point, the most important point and the one you should practice every step of the way when using a credit card. By doing this you don’t get interest payments, late charges, increased rates or fees and the myriad of other disadvantages credit cards can be responsible for.

Get your Bills Taken Automatically Out of your Card

Doing this allows you some mental freedom, the freedom to not have to worry. I do this and I never have to remember what date my bills need to be paid. I never have to remember how much they are. I also get a prompt payment discount from some utility companies such that I’m even paying them less. The only date I ever have to remember is the 24th of every month when my credit card bill has to be paid (see, I did remember!).

However, even this can be automated and means you have even less to worry about. Think about it: you have to pay those bills anyway, right, so why not just make them automatic? The Credit Card bill doesn’t arrive until next month so it doesn’t really matter if you pay on the 1st or the 30th of the month, just let it happen naturally.

Don’t See your Credit Card as Debt, Instead just see it as a Liability that Needs to be Paid

Many people see the balance on their credit cards as debt. I don’t and whilst I know this may fly in the face of many people’s opinions, that one is just mine. Instead, I just consider it a short term loan - a liability - but nothing more than that. In fact, it’s a loan for which I don’t actually have to pay any interest on! How good is that? It happens to be something I need to pay off by a particular date but I
just told you that I always pay it off, every month, so in reality it’s a loan. All it means is that my money stays in my account for longer than it otherwise would, hence I keep my money working for me for longer. It’s that simple.

By looking at your card as just another liability that must be paid by a certain amount of time, you’ll soon get into the hang of the fact that you get to keep your money working for you longer than you otherwise would.

Don’t View your Credit Card as an Emergency Fund

Many people think their credit card is their way out - an Emergency Fund if you will - but that is just silly. Please don’t. This is the second worst thing you can do with your credit card after not paying the balance off in full

I suspect that there have been many times when partying people have ran out of money and slapped a whole lot of drinks on their card … “It’s an emergency, eh bro’?” At that time of night, it might seem like an emergency but the reality of the cold and hungover day proves it wasn’t. Kristy also mentioned this in her post on Lessons Learned from being in Debt.

Using Your Credit Card to Your Advantage

Keep your Money in your Account Longer

As I just mentioned, I keep my money in my account for longer by using my credit card. The best thing is, this is for all the stuff I have to buy anyway so what does it matter if I put it on my credit card? What I don’t do is buy frivolous, unecessary and unneeded things on my card (or indeed, at all).

By putting your bills, your groceries, your travel and a myriad of other essential ‘needs’ (not ‘wants’) on your card, you’re making sure you keep your money working for you longer. If you current account pays interest, then you’ll reap the rewards of that. If you have a revolving current account like I do, then I’ll not be giving the bank as much interest each month. It works both ways.

Using your Card Builds Credit History

Building a credit history is important but remember this isn’t the only way to do this. Any form of loan can build a credit history but if you usually buy larger items with cash then your credit card is still a great way to get a better credit score (for those times you really need it). Yes, paying your bills helps too but I suspect not as much using your card.

Earn Reward Points

Cash back, rebates, air miles, reward points, reward cards - all of these can be given out by credit card companies so it’s worth looking around to see which ones give you the most. I know of people who use different cards at different stores since the rebates are higher there but I’m a one card person. Of course, you should choose what is right for you.

Using Your Credit Card Within Reason

Do Not Overspend on your Card

For much the same reason that you shouldn’t see your card as an Emergency Fund, you should also not use your card excessively. Mostly this comes down to the fact that you should be able to pay off the card in full the next month. If you are more particular about this, then you shouldn’t have more on your card at the end of the month than what you have budgeted for for any of those categories which you use the card for.

This too, is very important, otherwise it might lead you to the road of carrying a balance and therefore paying interest on your account.

Stay away from Cash Withdrawals (Cash Advances)

These transactions are pretty bad and oddly enough, many people don’t realise why. When you take money out using your Credit Card, they rack up interest immediately and in most cases at a higher interest rate as well. This is not good for your end of month statement and should be avoided as much as possible. Just a little advanced planning can help quite significantly.

Final Thoughts

But please be warned, some people cannot or won’t use their own cards in the right way. In some cases, this might lead to a perpetual downward spiral and therefore will have to get themselves back out of it. Credit cards are not for everyone. If you have used one in the past and said that they were not for you, then these tips above might not help. If you don’t see the point of using them, then don’t.
Otherwise, for those who can use credit cards sensibly and to your advantage, go for it and enjoy taking advantage of this smart way of getting the most out of your money.