Preventing credit card mess (2)


Three actions from getting your magic number, budget

Action plan 6
Find out your limit and set a maximum limit.
How? Spend less than the total of
a. One month income, less
b. Your fixed monthly payment add 20% buffer
If you spend any amount more than this magic number, you are either eating into your savings or increasing your debts.

You don't have to do a detail listing of expenses unless you enjoy doing it. It should be simple and quick. Just do a quick calculation with pencil and calculator now. Once you get the magic number out, you know you should never spend anything more than this amount at any one month.

Action plan 7
For big ticket item, find and decide a repayment method before spending.
Find the resource to pay back when you use your 2nd card for big ticket expenses like overseas trips, new kitchen cabinets, sofa, etc. Do you have fixed deposit elsewhere to payback the credit card balances? Are you willing to sell off your shares in stock market to clear the balances? Remember, credit card provides convenience of payment only.

Action plan 8
Still keen to spend without financial resources? Draft a repayment plan and stick to it.
If you still insist to buy even if you do not have existing financial resource, i.e. shares, unit trusts, fixed deposits, etc. to pay back, then develop a repayment plan. For example, cut down your future night outing, change your lunch place from restaurant to hawker centre, identify a bank that offer 0% balance transfer for 6 month, refinance your house equity, etc. Most importantly, you must know you can stick to the plan. Swear to yourself.

Two actions for a different mind set

Action plan 9
Live now.

"Live today" is not equal to "spend today". Mass media propagates the virtue of spending by equating it with "live now". "Carpe diem and you buy" is the message that drives a generation of debt-ridden middle class. If you need a brand new BMW 5 series to make yourself feel good even it means breaking your financial limit, you are highly ineffective, for you need such a big spending for such a small gain of satisfaction. Yes this is the word, consumption ineffectiveness. You need to consume more in order to bring your happiness level equal to an average person. It is not how rich you are that you can avoid debts problem, it is about YOUR effectiveness of spending in bringing satisfaction. When you have more money you get numb from the original level of spending. You need to spend more just to get to the earlier level of joy. The action plan is to change your mind set and find happiness that costs little and elevate your consumption effectiveness.

Action plan 10
Procrastination is a virtue, for once.
Practise procrastination in buying things. Tell yourself you are going to buy it but not now. After cooling down, it probably doesn’t seem to matter whether you own it or not.

More action plans on prevetion of cerdit card debts in Part 3...

12 amazing action plans avoiding credit card debts mess...
Part 1: Preventing credit card mess (1)
Part 2: Preventing credit card mess (2)
Part 3: Preventing credit card mess (3)

A refined article of twelve action plans in preventing credit card mess published in EzineArticle.

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