Budgeting, Spending and Debt Management - Part Two

In part one we showed you how to avoid credit card purchases, with a emphasis on purchasing with cash only. By doing so, you will avoid spending what you don't have. To pick up from part one of this article we will go into the steps to cut unnecessary spending and credit card management and proper use.

Cut unnecessary spending:
Your best debt management solution is managing yourself and your spending! Review your past spending patterns for specific time periods and evaluate where each dollar is going. Separate the necessities from the frivolous or unnecessary spending. The simple goal or plan should be to satisfy the necessary required spending and to significantly reduce or eliminate the unnecessary ones. When you have identified all the unnecessary items, add them up. The tallied total of your frivolous spending is the additional payments that you could potentially be making towards eliminating your debt on a monthly basis.

Do not spend more than you earn:
If after evaluating your spending patterns you realize that you spend more than you earn, you obviously have yourself a big problem. If this pattern continues you will never rid yourself of debt but instead will be sinking lower. If your spending patterns prove that a significant amount of your income is spent on unnecessary items simply eliminate those spending habits, otherwise, consider seeking means of increasing your income.

Hide or get rid of most credit cards:
Having available credit is beneficial. Therefore, having multiple credit cards is not a bad thing, but having multiple credit cards with outstanding balances is bad however. If you find yourself with multiple credit cards, work to eliminate the balances on all of them as a first step. The second step should be to find one or two that have the lowest interest rate and cut up or hide the others. This will eliminate the temptation of using these additional cards. If you went with the option of destroying the cards don't worry, the credit card companies will be more than happy to replace them for you if you decide to use them in the future. By having “available” credit that you aren't using, this reflects well on your purchasing power and consequently increases your credit score and credit ratings.
 

Keep one or two “Emergency” credit cards:
Your “emergency” credit card or cards should be the only credit card that you use for spending if you have to spend on credit. As the name implies, it should only be used for emergencies. Spontaneously buying a new pair of shoes because there is a new sale in a department store is not classified as emergency spending. The emergency cards should have a low interest rate, preferably below 12%. Whenever used, try to pay the balances off on your emergency cards immediately.