We live in a credit-fuelled world. Not only are many of our domestic lives propped up by credit, but our governments and entire economies are on the same, shaky platform too. Many people, understandably, are becoming unwilling to bear the weight of heavy debt on their shoulders, and are looking to move away from the use of credit altogether. While it’s impossible to avoid completely, short of moving to a cabin in Patagonia, there are some great ways to seriously reduce your reliance on credit, creating a far more stable financial base from which to work. If credit is something you have always struggled with, or you’re just interested in creating some solid financial habits, keep on reading.
Budget for a level playing field
Credit cards have their benefits, and many people will choose to keep one in their possession for emergency use and holidays abroad. They also offer incentives for their users, such as points for travel, or a percentage cash-back. So suggesting that you scrap them all together would be foolish. But ensuring that you can always pay the bill at the end of the month is essential. If you’re overspending on your credit card, you’re going to start to incur costs when paying it back becomes a struggle. Don’t see it as free money, see it purely as a way to move money - this is the key. When you keep a budget and track your spending, it’s easy to ensure you won’t overspend on your credit card, so paying it off after payday is never an issue. This brings you all the benefits of using the card, with none of the long-term debt risks.
Create your own pot of money
Many people choose to keep a credit card for emergencies. That’s a completely understandable decision, but it is one which could backfire if you have to spend beyond your means of repayment. A far more sensible and financially secure way to ensure you’re prepared for emergencies is to grow and maintain an emergency fund. This is a pot of money, preferably in a high interest but easily accessible account, which would amount to around three months salary for the household. This pot of money can really come in handy for numerous reasons. Firstly, if yourself or your partner happen to lose your job, you’ve got enough money to last you at least three months while you look for another, without having to sacrifice anything on your quality of life. While you could do this with a credit card, the benefit of the emergency fund is that you don’t have to pay it back, with interest, at the end of the day. It’s also particularly useful if you need to pay for emergency car repairs, vet bills, or a new boiler in the middle of winter. If you don’t have an emergency fund, start saving today - you never know when the money might come in handy.
Don’t bin it - hide it
Some people really struggle with the temptation of credit cards, and end up having to seek out debt advice as a result. For these people, the obvious response is to throw away all credit cards, but at closer inspection, this might not be the best way. People find credit cards reassuring, but they also promise a life which a consumer might not be able to afford. Throwing the card in the bin can just make it all the more tempting. Hiding it, on the other hand, might be the way to go. Of course, you can’t really hide it from yourself, but locking it up in a document safe just ensures you have an extra process to go through before you can make the purchase. Going through those extra steps gives you time to consider whether this really is something you’d like to do, or whether there’s an alternative option. It enables you to feel reassured by its presence, but keeping it locked away also enables you to take ownership over the decision to use it, without just allowing yourself to go into auto-pilot. If you find it a bit of a struggle not to make purchases beyond your means, locking your credit card up could be the perfect solution for you.
Avoid tempting online shopping
Aren’t one-click online shopping websites useful when you’re in a rush? They’re not so useful, however, when you struggle not to overspend. Impulsive purchasing can be really harmful, and when you use a credit card for the majority of your online payments, the repercussions of your actions are not immediately apparent, sometimes they remain hidden until it’s too late. So, what is the solution? Well, it’s simple really. When you sign up to a website for online shopping, ask it not to remember you card. Websites allow you to save your card details to make impulsive purchases far more difficult for you to control. When the transaction takes three clicks and only ten seconds to complete, you don’t have a lot of time to check yourself. The solution is to refuse all websites suggestions that they should save any of your card details. This way, you have to hunt out your purse or go to your document safe, come back, and type in all your information in order to make a purchase. During this time, you’re able to begin the process of considering whether it’s worth it. If it is, you’ll go through the transaction anyway. But buying that extra time could make all the difference when it comes to talking yourself out of buying things which do not allow you to live within your means.
Be strict with your own rules
Finally, and most importantly of all, make your rules and stick to them. If you don’t trust yourself to even own a credit card, don’t let anyone talk you into it - you know your foibles better than anyone. If you want the security of a credit card, set your boundaries. Will you pay it off at the end of every month without fail? Or is it safer locked away for emergencies? Create yourself a secure financial foundation, and you might never feel the need to reach for your credit card again.