Thoughts on Debt

Everyone thinks that using a debit card instead of a credit card, is the wiser, less expensive way to go.  Well, let me state it very frankly for you, this is only true if you are using your debit card wisely.  Let’s say that you have a credit card and you make 10 charges on that card then you will have to pay off the balance in about a month and the interest won’t accrue very much at all.  But let’s say that you have made those same 10 charges on your debit card and you haven’t correctly balanced your account and then you receive return check fees on those 10 items in the amount of $35 per item, then that would be $350.00 for charging those 10 items, so quite frankly it can cost more using your debit card if you are not careful with your money.

This quite frankly goes back to the old philosophy that the rich get richer and the poor get poorer.  Honestly, have you noticed that when you don’t have money, they charge you more money.  If you don’t pay your bills on time, they make them bigger by adding late charges and/or interest.  If you don’t have money in your account and a check comes in they charge you a fee.  Sometimes the fee is actually bigger than the item.  So the fact is, if you want to hang on to your money, then don’t buy what you can’t afford.  This can be difficult in trying economic times or when things come up, but quite honestly, this is the only way to get more money.

If you see yourself in this situation, work hard to rectify it.  Keep good records of what you have spent and what is in your account, and keep at least an extra hundred dollars in your checking account just in case you forget about something that you paid or have an automatic withdrawal that you forgot about.  These can be deadly if you don’t keep up with what dates certain things get withdrawn.  In any case make a plan and stick with it.  Good record keeping is the key, so stay on top of it and don’t be caught short, it will cost you big time.

The best way to stay one step ahead of the rising cost of everything is to budget. This has been something that I have always struggled with, so I went online to find some tips on how to create a budget, and came up with a realistic way to do this.

You must first take a look at what you are spending so that you can adapt it accordingly. Unfortunately this is not always easy. We can all account for how much we spend on utilities every month, but figuring out the smaller more trivial amounts that we spend each month can account for a lot of our missing money, and we don’t even account for it. In order to take a good hard honest look at your budget, you must first account for every dime you spend in a month. Now, I have found that tracking your spending from one end of the month to the other is easiest if you do it all out of one account, on your debit card or credit card. Otherwise you must save every receipt in order for your assessment to be accurate, let’s face it for most of us keeping track of each receipt can be tiresome. Some people say that you can just keep track of your spending for a week and then figure out a monthly budget, but I prefer doing it for the month. Sometimes there are expenses that occur at different times of the month and so I have found that looking at my monthly expenses gives me a little better overview.

Now, once you have tracked your spending for an entire month, put it down on paper into categories. Monthly bills on one side, these are the expenses that you may be able to cut back on a little, but they are necessities like house payment, electric, fuel oil, water, basically all the things that must be. On the other side make categories such as entertainment, dining, cigarettes and/or alcohol, clothing, and any other category that applies to your life. Lastly, make sure that you include your monthly grocery bill and auto gasoline bill on the other side, as these are necessities that can be reduced, but more than likely can not be eliminated.

Now, on the top of your page write down your take home income, how much you cleared after taxes. In an ideal situation you will be able to save 25% of your salary. If the amount that you have spent is more than 75% of your take home, then it is time to start cutting back.

The more you can save, the more you can spend. Now is the time to really tighten the belt and cut out all but the necessities and if you can use coupons, shop sales, and shop around for the services that you need such as car insurance and phone services, do it. The more money that you can keep in your pocket the better.