Wednesday, April 9, 2008

Developing a Spending Plan

spending plan
Are you the type of person who falls behind on their bills and other regular monthly payments? Do you apply for credit and then spend all the way up to the credit limit because you think it's a type of "free money"? Do you have problems balancing your checkbook or stretching your money from payday to payday? While many of us struggle to stay above water financially, there are many solutions to our money problems that can be dealt with using common sense.

First of all, if at all possible, follow a zero-balance policy for your credit cards, if you're going to use them at all. Since you are probably paying way too much in interest, try to only buy items on your credit card that you know you can pay off before the next statement. A zero-balance strategy will allow you to use credit cards conveniently, and gain points from reward systems without being penalized by high interest charges. And if possible, eliminate the use of store credit cards entirely, as they tend to have much higher interest rates than traditional VISA and Mastercard credit cards.

If you feel you must access other services, such as short term loans or payday advances, use the money wisely to pay off other outstanding debts that would otherwise incur other service charges or fees. Short term loans will provide you with fast cash, but you must be able to manage it wisely as you are paying a very high price for this service. Whenever possible, use your bank's lending services (overdraft protection, line of credit) to deal with situations that require you to use money that you don't have.

It's important that you develop a plan that will minimize the use of credit and rely more on spending only money that you have. Sit down and figure out what your monthly costs are, and how much you are earning, and design a system whereby you will be spending less that you earn, allowing you to eradicate your credit card (and other) debts, reduce service charges, and eliminate other fees that are taking money right out of your pocket. The money would be better spent on personal investments rather than on some financial organization.

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