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Should You Use Credit Cards or Cash?

It’s no surprise that using credit cards is a major convenience. There’s nothing easier than taking out a small card and using it for your everyday purchases. Unfortunately, the ease of using your credit card is also the cause for millions of dollars worth of credit card debt. Because it’s so easy to simply swipe a card and purchase whatever you want, it’s far too easy to let your spending get out of control. Because of this, one of the most important questions a consumer should ask themselves is whether or not they should be using credit cards or cash? While the answer to this question can vary based upon your income and what you wish to purchase, there are several guidelines all consumers should follow.

Knowing When to Use Credit Cards

Credit cards are an excellent financial tool, when it’s used properly. Unfortunately, many people are unaware of how to clearly determine when using a credit card is acceptable. Because of this, there are a few rules you should go by to ensure you’re always making the wisest financial decisions:

You should always take proper precautions in respect to credit card security. “Follow the standards set forth by your credit card issuer,” says SecurityGuardTrainingCentral.com, “and your chanced of fraudulent activity are substantially diminished.”1

You should never use your credit card when the fee for doing such isn’t the most cost-effective option. While you may think paying your mortgage/rent or any other recurring bill with your credit card is a good idea because you’ll earn reward points, this is just not the truth. Because all credit cards feature interest, if you’re unable to fully pay off the balance, then you’ll actually end up spending more money on these essential monthly purchases. Therefore, always pay cash for such bills.

Should you find yourself facing an unexpected bill, such as a medical bill, you should always negotiate with this creditor before turning to your credit card. In many cases, when you contact the billing department for such bills, you can actually have your balance owed reduced – or an interest-free payment plan – which will ultimately save you money in the long run.

If you’re planning on obtaining a mortgage in the relative near future, you should avoid using your credit cards when at all possible because any changes to your credit report can be disastrous when you’re seeking to open a mortgage loan. Resist the urge to make any major purchases and definitely don’t open a new line of credit. Failure to do so can negatively impact your chances of obtaining a mortgage. Moreover, if you’re in the process of having your mortgage application looked over then you should avoid using your credit cards until the process is complete.


How to Live Debt Free

Living in debt can be stressful and can put unnecessary pressure on families that causes more than just financial problems. About half of the United States population does not have enough money in their accounts to pay of credit card debt each month. That is not even taking into account car loans, student loans, house loans or any personal loans they may have. It is possible to break the cycle of debt and live a debt free life with hard work and determination.

The first step to living a debt free life is to save up an emergency fund. While it is best to save up three to six months worth of expenses, start by saving up $1,000. This is you safety buffer so that the next time an emergency comes along you do not need to put it on your credit card going further into debt.

After you have saved up money in your emergency fund, you can start paying off your debts. Any additional funds you receive above your cost of living should go directly to paying down your debts. Start with the smallest debt you owe first, like a credit card, and then work up from there to your largest debt (probably your house).

Once you have paid off a credit card, try to get rid of it. It is best to live without the temptation and ease of being able to put all of your transactions on there. Instead use cash or a debit card when making purchases. While it is a significant challenge and all members of the household must be on board, living debt free creates peace and freedom. Financial peace and freedom allows you to experience less stress and use your money the way that you want to see it used.

How to Budget – Personal Finance 101

The key to successful financing is a budget. Even the most successful individuals work on a budget in order to keep track of where their money goes. It is important to be in charge of your spending otherwise your money will be in control of you. Budgeting is simply the task of determining what you need to spend money on and assigning each category a dollar amount for the month. They key to successful budgeting is to give every dollar a job. Leftover money creates gaps and opportunities for unnecessary and careless spending.

The first step of budgeting is to sit down with you spouse or partner to plan the budget together. Both parties need to agree on the budget in order to carry it out successfully. If one party feels strongly about one area of the finances, take the time to listen to why this is important and discuss all the impacts it has on the rest of the finances. Once you have assigned jobs for your money the next step is to keep track of every dollar you spend. Even if you use cash for something instead of a credit card, be sure to record the amount. It is likely that there will be surprises along the way and things you did not budget for the first 2-3 months you try this. However, budgeting does get easier and more accurate the longer you stick with it. Over time you will begin to see how valuable it is to live within a budget (and your means). This will also be true if you are saving for a vacation or other large expense. Set aside an amount each month for large expenses so that you can still budget accordingly when the month comes.

Another key component of successful budgeting is planning ahead. Even though Christmas only comes once a year, it is a good idea to budget for it monthly, or at least for a few months before December. This will also be true for quarterly expenses such as insurance, garbage payments, and other bills.

Living on a budget may help you pay all of your bills in full and time (including credit card bills) and may help you to pay down your debts faster. In doing this, you can start to build your credit score. While a credit score of 650 is the most common credit score, you should aim to reach a credit score of 700 or better. The higher your credit score, the easier it will likely be to be approved for loans such as a home mortgage.