January is usually a bit of a letdown. Holidays are over, winter is in charge, and it hardly seems possible another year has passed. Unfortunately, January can come with a nasty surprise— the credit card bill or the credit hangover.
The financial realities of credit spending are laid bare and the bell usually tolls in January. Your anxiety soars in the beginning of the year, the culprit is usually financial. According to the Federal Reserve, credit card debt recently hit a record high of one trillion dollars. So, while many are in the same financial boat, it may be taking on water. How can the boat be patched? Or, how can the credit whirlpool be avoided altogether in the future?
The answer is very straightforward: Budget. It does not have to be fancy, just used. Many people have never followed a budget although the math is simple: income minus expenses is either a positive or negative number. An honest budget may reveal some uncomfortable truths. AND it can be an emotional barrier that prevents prudent financial discipline.
A budget allows you to track monthly finances. Most people know what their monthly income is, it is the expenses that prove mysterious. This is exactly where credit spending can be dangerous and lead to anxiety down the road. Begin by simply tracking your expenses. The only person you must be honest with is yourself. Expenses (including credit card debt and those pesky interest charges) may add up to more than income. Keep bailing and tracking. Whether good, bad, or ugly, at least now you have aa clear picture. The goal is to have a budget that is cash flow positive.
Even if expenses are more than income, with time and a concerted effort, things can improve. Look for daily efficiencies. Focus on eliminating wants especially status wants. They add not intrinsic self-worth. They are just things. What do you really need. This may be a little painful at first but stay with it until you are cash flow positive. Exerting control over your financial environment equals fiscal power.
Expenses can be trimmed only so far. Living under a bridge is probably not an option. So, your expenses are still more than income, you need to increase your income. A part time job may a painful solution, but also a necessity. Once a budget is cash flow positive, everything changes. Savings can be used to pay down credit card debt or let savings can accumulate for future goals. One such goal may be next year’s gifts. Have the money saved to by the gifts, and……. have a gift budget before you pull out the credit card.
For more information on getting your financial house in order, check out Jonathan McSurdy’s other article Destination; Financial Fitness – A Travel Guide. Also check out the Credit Counseling Center in Bucks County for resources and assistance in preparing a budget. For other counties, search for reputable debt consolidation and planning agencies.
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