How to Get Out of the Credit Card Spiral

Once upon a time, before credit cards became available, we had to plan our spending and future expenses. To use all our money meant we had no holiday or no cash to see us through to next pay day. The ease of credit cards has made us sloppy and we no longer plan ahead because of it. Running out of cash no longer means running out of money -- after all you can go to the hole in the wall and draw some out. As a result we have become a nation of borrowers.

This easy access of credit has led us to forget about budgeting and only living for the day. When an 'unexpected' bill comes in such as an annual insurance we go into shock and reach for the credit card. But it really isn't unexpected at all we've just forgotten to do anything about it. So when unexpected bills do come in such as an emergency trip to the dentist the credit card once again takes a hammering.

How do we get out of this credit card spiral?

Start by setting up a budget and allowing for annual expenses. Anticipate emergency funds, allow for holidays and gifts. All your figures should be converted to a monthly figure.

Next open up an interest bearing account and set up an automatic transfer each month for the total monthly figure you have calculated.

Start a mini ledger and allow a column for each anticipated bill or expense. Enter the sum each month in the relative area. Sometimes your expense will need to be paid before there is enough showing in the ledger but there will hopefully be enough saved in the account to pay the bill. This should work unless you start your budget system at a time of extra heavy expenses.

If you receive an unexpected bonus pay this to the account setting up a new column for your dreams.

This method should make sure that you have enough for your annual expenses without groping for the credit card. BUT a word of warning: This account is for planned expenses and should not be considered a savings account. And remember that credit cards are a debt and not cash.

By Lyn Bell