Finances go astray with too many credit cards

Finances improve when you cut up your Credit Cards!

Ever reached into your wallet to pay for a $4 coffee and whoops, nothing there? Zip, Zero, Zilch. Nought but a few silver coins. No embarrassment if you just go ahead and put it on your credit card. If you pay for it out of savings instead of credit – fine. But it’s not good if you know you have no savings and everything extra is just going into credit. Somewhere along the line you need to settle down, give yourself a shake, and work out how much money you really have! Before you owe a heap of money on credit cards. Following is a really good simple way for you to budget, but to start you have to work on it and be serious. Okay, are you serious enough to start sorting out your finances – well here goes.

The first one you won’t like one bit – CUT UP YOUR CREDIT CARDS!

Yes, you did hear that correctly, cut up your credit cards! You might need to hold onto them for a little while as you save to pay them off, but do not, repeat, do not pay for another item with your credit card. If you don’t have enough cash to pay for an item you do not buy it.

A difficult month

Now the first month will be really difficult, but once through that period you will start to see by putting money away you have enough money to pay most of your regular bills. Tell your friends you are cutting back on your social life for at least a month. I never said this would be easy. But believe me you will have a better lifestyle if you can sort out your finances and put the following into practice.

  • Buy a packet of envelopes, and they can just be normal postage envelopes.
  • Sit down and on the first envelope write the name and approximate amount of regular expenses, eg food. On the next envelope write the same information for rent; the next one petrol or train or bus fares; the next one pharmacy. Keep going with envelopes for hairdresser; car service; food; electricity; gas; drycleaning; veterinary – any regular expense.
  • When you obtain your weekly pay, from an employer, from Centrelink or wherever, go and cash around 90 per cent so keep 10 per cent in your bank. Now get the feel of having real money in your hands. I cannot repeat enough, you must be serious about wanting to get your finances back in order.

Divide up your cash

  • From the cash in your hand, divide it up and put the required amount into each envelope.
  • To exist, you need to have a roof over your head, so put aside your weekly rent cost. If you are in your own home, work out your yearly cost of owning your own home with rates or body corporate fees etc, divide that by 52 weeks in the year, and that is the amount you put aside. With things like hairdresser for example, you might have a regular visit every six weeks, so write on the envelope the full cost, divide it by in this case six (weeks), and write down that amount on the envelope. That is the amount of cash you should put into the hairdresser envelope every week.
  • I will use the hairdresser as the example, so the next time you head to the hairdresser, take the money from the Hairdresser envelope and you will have most of the money. Keep going with your budgeting and after the next six weeks you will have the full amount ready to pay.
  • If you are paying off credit cards, never just pay the minimum amount due, you will never get ahead of the amount owing so while you have a bit of extra money in hand, pay as much as you can afford. If you can pay the full amount owing on your credit card each month, you may not have to cut the cards up, but try and use it only occasionally.

So now you get the idea

Divide up the cash you have from your income, and put the required amount into each envelope. It is a good way to really see where your money is going. If you run out of cash before you finish – you have a real problem. The good news is now you know if you need to find ways to reduce your cost of living. You might have to think about moving into cheaper accommodation, a share house, or maybe worse – back with parents. Just until you get your finances under control and any credit cards paid off. Think twice before splurging on a night out with your mates, a new handbag, pair of shoes, new t-shirt – do you really, really need it? If you have money left over each week, well done! You can start saving for your future!

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