Avoiding the Pitfalls of Credit Card Debt

Written by A Guest Speaker on May 21st, 2008

Avoiding the Pitfalls of Credit Card Debt
Written by : Chris Guthrie

Falling into credit card debt is one of the worst ways to waste your money. Every month that you carry a balance on your credit card you’re wasting money, especially with some interest rates on credit cards in the 20 percent range. Now it’s easy to say that you’re going to waste money if you don’t pay off your credit card bill, but when you’re caught in a cycle of growing credit card debt things can get scary. So I’d like to give you a strategy for avoiding credit card debt:

Setting a Budget:

You’d think that people wouldn’t have so many problems with credit card debt when you simply need to avoid spending more money than you earn. However, it’s easy to run into a situation where you’ve made several purchases without realizing you don’t have enough money to afford them. So to help avoid credit card debt you absolutely have to set up a budget. Start by listing out all of the recurring monthy expenses you have such as rent, food, utilities, gas, car insurance, car payment etc. Now that you have listed out your monthly expenses, write out your monthly take home pay (which is what you get after taxes are taken out). If your take home pay is less than your monthly expenses you need to find a higher paying job or take on a second job because you’ll never be able to get out of credit card debt.

On the other hand, if you find yourself in a better financial situation with money left over after you take out expenses than you have something to work with. Take what money you have left over from paying your bills and try to save some of it. The portion you save will vary from person to person, but it’s very important that you do save some of your left over money and put it into a savings account. Now that you know how much money you spend every month and how much money you have to work with it’s important to keep a rough running tally in your head as you make purchases throughout the month. The key here is to always stay ahead and have more money left over at the end of the month than you started with so that when you stop by your local electronics store and absolutely “have to” purchase a new HDTV you can do so without having to go into credit card debt. I speak from experience when I say you never want to find yourself in the situation where you buy things now and pay later because in the end you’ll end up paying much much more later.

Join me next week when I cover what to do when you’ve fallen into credit card debt and can’t get out.

*I know you wanted both topics to be covered, but I thought it would be a perfect spot to keep the readers hanging on until next week by splitting the times up in two. I also found myself running out of room as well, so that’s why I didn’t cover them both in this post*