Credit cards are presumably the biggest culprit for pushing one into a debt trap. Such situations can lead to one making it to CIBIL defaulters list and becoming ineligible for a loan or any other credit facility. This has potential to result into not getting required funds at the time of need and a requirement to enhance credit score before one’s loan application even gets reviewed by a lending institution.
Admit it, we all have them… those questionable spending habits that invariably land us in debt, or at the very least, ensure we rack up quite a credit card bill. Once we get accustomed to shopping using plastic, there inevitably is no looking back… It doesn’t mean that the instant you finish reading this piece you go chop up your credit cards, but instead consider various options to reduce your credit card spends.
What is it that tips you over? Shoes? Handbags? The latest electronic gadget? Whatever be your poison, know that mounting card bills signify nothing but a problem, and one that you should take severe – and immediate – steps to rectify.
Let’s look at ways by which you can give yourself a break, and eventually kick the spending habit.
Identify your spending pattern – When you spend, there would typically be a pattern that you follow. For example, do you tend to shop more (and unnecessarily) when you are stressed? Or do you do shopping sitting on your desk using online credit card option when you are bored and have nothing concrete to do? If yes, ensure you have a distraction at hand – go for a short walk, or pick up a book to read, or concentrate on your hobby. This way, you’ll not only have saved yourself some money, but also enriched your life a tad!
Also, take stock of what you own, and what are your ‘weak spots’. You may just realise that you have three new handbags, and really don’t need any more!
Make a budget – And do stick to it! It’s easy to keep spending on a card because you don’t have to fork out the cash on the spot. Remember though that you income is limited, or fixed – and that at the end of the month you’ll need to pay off the amount that is due on your card account. Ultimately, a credit card is nothing but an unsecured loan, and one that ideally should be paid in full to avoid toting up additional amounts by way of fees and charges.
Sit down with paper and pen and put down those numbers. Factor in your regular monthly expenditure, for example, which includes any EMI you have going for an existing loan. Once done, be honest – identify areas that you need to cut back on and those where you absolutely need to make purchases, such as home essentials.
Make a list – Before you step out to the stores, make a list of what you need to buy, and stick to it. Even if something looks tempting on the shelves, remember that since it’s not on your list, you probably don’t need it anyway. If that doesn’t work for you, send someone else to do the shopping – a family member, for example, who you know will stick to the list and not come back with unnecessary items.
While you’re at it, consider the places you normally shop. For example, if the supermarket is inside a mall and it is tough to avoid temptation and not go into other stores, stop shopping there. Try going to a standalone supermarket where you’ll get the same goods but will not have access to any other shops.
Do a walk-through – If you see something you really like at a store, hold on before you make the purchase. Simply ‘walk through’ and if you feel you do require the item, you can always go back to the store and buy it. Research shows that a majority of people who walk away from a purchase for even 30 minutes will not return to make the purchase, as the time away from the product or service helps them evaluate whether the purchase is vital or otherwise.
Reevaluate your entertainment options – Used to dining out frequently? Try to rationalise your spends here, as entertainment can turn out to be quite expensive. Maybe arrive at a compromise – budget one expensive meal a month, and keep the others to either low cost or home cooked meals. Ditto a movie outing – subscribe to your favourite movie channel on the television and avoid making trips to movie theatres. Remember, each such movie outing can set you back (assuming two adults) by at least a thousand rupees, if in a metro city in India.
Similarly, if the smell of fresh brewed coffee is irresistible as you get to work each morning, consider either carrying your own flask to work, or having what is available there. Swiping a card at the cool new coffee shop every day, or every other day, can set you back by quite a bit.
Remember, cutting back on spending isn’t something that will happen overnight. It may well have taken you months or years to get into the spending habit, and it may well take you a similar amount of time to break it. Don’t however get disheartened – try and cut back your spends so that you eventually are able to balance your income and outflow, and even save for that proverbial rainy day.