Are you using your credit cards as a security blanket?
This is especially common this time of the year.
When it seems like you never have enough cash for everything you want or need to buy.
It seems safer to use your credit cards now- just in case you need the cash for something later.
Because running out of cash is scary.
But, if you are making purchases on credit cards and you do not have money in your account to pay off the balances immediately, you are setting yourself up for failure.
And not the “fail forward, fail often” kind of failure I was talking about last week.
This is the kind of failure that can put you into a downward spiral of debt and despair.
When you cannot pay off your credit card balances in full every paycheck or, at a minimum, every month, you have to pay interest and possibly even additional charges for going over credit or paying late.
If those balances get high enough you could find your minimum monthly payment goes mostly to interest charges, making it almost impossible to pay off the balance.
When you add interest, suddenly that “great deal” is not so great…
So, how do you avoid this trap?
Create a spending plan that includes savings for special occasions and/or gifts. Put a little away into this account/envelope/piggy bank/jar each pay day.
Then, when it is time to make the purchase(s), you have the cash on hand.
Bonus points if you have a rewards credit card because then you can make the purchase with the credit card (which may also give you additional protections and warranties in addition to whatever the reward is) and pay it off right away with your savings.
Have you used your credit card as a safety blanket in the past? Do you do that now? Why or why not?