I will be the first one to admit I’m no financial guru. Matter of fact, I am the last person you want to come to about money matters. But, even the most financially challenged person can pick up a few tidbits every now and then through past experiences and discerning what works and doesn’t work when it comes to managing your personal finances. Running a business makes you even more attentive to your spending habits. And in these trying economic times, it is even more essential now than ever to know how to stretch a dollar to its limit.
It is much easier to swipe your plastic cards – whether it’s a credit card or a debit card – for the purchase of goods and services, and be on your merry way; of course until the bill shows up. No one wants to be that person in line slowing everybody down by pulling out a check book or counting out cash and then having to wait for change. It’s a whole lot easier to whip out a credit card, sign (some merchants don’t even require that you do this anymore) and be on your way. Unfortunately, millions of Americans have swiped their way deeper and deeper into debt. The temptation to purchase something now with the honest attempt to pay it off when the bill arrives happens to the best of us. The down-side to this, however, is that we cannot predict the future; the bill arrives, but the funds are unavailable to pay it off.
Here are some habits I have tried to develop and which have so far proven successful:
Pay yourself an allowance in the form of cash: You work hard for your money and deserve a cut of your earnings for your own enjoyment. Pay yourself a reasonable allowance out of every paycheck – to go towards grocery, gas, clothing, entertainment and other activities you might want to engage in – and stick with it. This will cause you to think twice before you make any purchase. Once your allowance runs out, that’s it! Don’t go borrowing from your credit cards or savings or any other stash you may have set aside.
If you really must use your credit or debit card: in the event of an emergency, (because life as we know it is so unpredictable and “comes at you fast,”) use your bank card if the funds are available. If the funds are not available, and you must turn to your credit cards for rescue, make sure you pay the money back to your card as soon as you can. What I do, in those sparse moments when unexpected bills show up or the amount I expected to pay has increased by a couple of extra dollars, is to borrow from my credit card, then schedule a payment right away to be taken out exactly on the date I anticipate a paycheck. This way, you do not incur finance charges on the amount you charged, and you are not piling on new debt. Of course, you want to check your credit card’s financial policy as each one tends to be different depending on their terms of agreement.
Know your credit or debit limit and how much money you have in the bank. If you don’t have it, then don’t spend it. It’s as simple as that. It will cost you dearly in the end. Developing a habit of good financial and spending practices takes time and patience. Study what works and doesn’t work for you and don’t beat yourself up if every once in a while you find yourself falling short. It happens to the best of us. Pick yourself up and dust yourself off to financial independence and responsibility.