Friday, September 2, 2011

Shop Wisely To Avoid Debt

Everyone loves shopping. Just look at the crowd at the shopping complexes during mega sales. Some even find it therapeutic, some catch up with friends while shopping while you have those that use shopping to socialise. Some even take it as their weekly exercise regime!

The not so glamorous side of shopping is that you might find yourself heavily in debt - credit card debt to be exact. Let me share with you the 4 spending habits that you must practised to avoid the debt trap.

Habit no.1 - Put down on paper your budget and not just in your memory. Having a budget helps to prioritise your spending habits. Never spend more than what you earn every month. Best is calculate how much spending power you have left after deducting all your necessities such as car and housing loan. Then spend within your means. If you suddenly come across a beautiful dress on sale, but you have used up your budget for the month, then you have to force yourself to walk away.

Habit no.2 - Do not ever try to spend money which you think you are going to earn soon. Spending 'future money' is a sure path to debt. Paying for things in installments is just like spending 'future money'. If you have a few such installments to pay every month, this can create debt if you fail in your repayment. Avoiding using the next month paycheck for this month's purchases.

Habit no.3 - Everyone uses credit cards to pay for most purchases these days. in fact most own a few cards. The trouble starts if you do not keep track of what you buy and just keep on signing for what you assume are just small purchases. These small purchases can turn out to be one huge purchase way above your spending limit at the end of the month. Keep a file on your daily or weekly purchase so as to keep your spending power in check.
Habit no.4 - Never ever consider using debt to pay off debt. This means that someone who is in debt tries to use a credit card to pay off this debt, but ends up in debt to the credit card company. This is just moving the debts around and you end up with more debt. But if you can transfer your debts from a higher interest card to a lower interest one, then you can slowly reduce your debt, provided you do not use the card for other purchases other than paying off the original debt.

A moment of weakness can lead to a lifetime of regret. Overspending month after month can be one of them.

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