In the last article on this subject, I wrote about groceries and how to do them cheaper so you come under budget each time.
In this article, I will be speaking about the balance of your bills versus what you spend on actual living.
But please accept these basic truths.
Credit is a tool and if it is not used correctly, it hurts.
Paying all your bills on any cheque hurts your cash flow.
Simplifying bills is not always better.
Often it means that you are issued notices long before you're overdue two months because the amount of the bill trips a limit.
Imagine, it is payday again.
Wow.
Great.
Before you even get that cheque, you know it's basically spent on bills.
Every kind of bill imaginable and you're intent on paying them.
Oh boy, do that and you risk not having any money for food or some of the other necessities of life.
So what happens next if you pay all your bills from your paycheque right away?Yes, naturally, you don't have anymore than change in your pocket and so of course, out comes the credit.
If you are the average North American, you can't afford a credit card...
not a traditional one anyway.
People will give you all kinds of reasons why credit is good and other reasons why it is bad.
There doesn't seem to be a consensus about it.
In this case, I'm stating emphatically that you cannot afford a credit card if you're living as most people do from paycheque to paycheque.
Even if you are making minimum payments, it's too much money out of your pocket.
That twenty bucks could have gone elsewhere.
That one hundred dollars could have gone elsewhere.
Credit encourages laziness.
It asks you to take the road most traveled, and naturally the easiest road to pick.
Defering credit with minimum payments from month to month means that the minimum payment becomes larger and larger and larger.
The hole it is digging into your cash flow gets bigger by the month.
So instead of taking 20 bucks out of your pocket as it did in January, now it is taking about 40 bucks.
By June, you're up to 50.
People consider this kind of money a small thing but over time the amount of money spent goes up and up just to meet basic minimum payments.
The more you defer larger amounts, the more likely you are to need another credit card.
And what about those months where you heroically take a real chip out of the credit card's balance?Usually those months lead to less eating which leads to more credit being used.
So first thing is first.
Put the credit card in a drawer and I will explain how to figure out how much you can pay to what you owe, strategies to reduce the amount you're paying in bills and services as well as showing you that credit is unnecessary.
Say you get your paycheque and it is four hundred dollars.
That means, you can only spend 200 dollars on bills.
Half.
If you make 700, you can spend 400, slightly higher than half on bills.
That's the magical formula.
You need to stay near the half mark.
The next question has to be, but I can't pay everything off that way?Then, that means you have too many regular bills.
Time to start trimming your services.
Look at some of your basic service bills such as cable, telephone and hydro.
In the case of cable, get rid of anything above basic.
That'll give you a lot of relief.
Or better yet, phone them up and say you're hurting and will have to reduce services, they may well find a solution for you so that you can keep a little extra in services.
As for the telephone, do you really need to know who is calling you?My bet is no.
So forget call waiting and all of those fancy ring tones as well as call display.
If it comes to having a choice between having a phone and non at all, then I would pick a phone.
If your long distance is not a package, flat rate unlimited, then dump it and find a company that has that.
In the case of Hydro, think of looking for energy leaks.
For example, do you have a dryer that is from the dark ages?Do you have a washing machine that eats electricity on every load?What about a huge freezer?Dump them.
Replace them with more modern equipment.
Then move on, shop around for insurance etc..
You can always find that kind of thing cheaper.
Dump bills that are ridiculous for small amounts.
Pay them yearly instead.
Once you start using this formula for success, you will always have more money in your pocket and your need for credit will become a thing of the past.
The main thing is to always keep a certain amount of money available for spending, which is what we all do with money.
Then, you don't need a credit card.
This is yet another way you can live within your means.
In this article, I will be speaking about the balance of your bills versus what you spend on actual living.
But please accept these basic truths.
Credit is a tool and if it is not used correctly, it hurts.
Paying all your bills on any cheque hurts your cash flow.
Simplifying bills is not always better.
Often it means that you are issued notices long before you're overdue two months because the amount of the bill trips a limit.
Imagine, it is payday again.
Wow.
Great.
Before you even get that cheque, you know it's basically spent on bills.
Every kind of bill imaginable and you're intent on paying them.
Oh boy, do that and you risk not having any money for food or some of the other necessities of life.
So what happens next if you pay all your bills from your paycheque right away?Yes, naturally, you don't have anymore than change in your pocket and so of course, out comes the credit.
If you are the average North American, you can't afford a credit card...
not a traditional one anyway.
People will give you all kinds of reasons why credit is good and other reasons why it is bad.
There doesn't seem to be a consensus about it.
In this case, I'm stating emphatically that you cannot afford a credit card if you're living as most people do from paycheque to paycheque.
Even if you are making minimum payments, it's too much money out of your pocket.
That twenty bucks could have gone elsewhere.
That one hundred dollars could have gone elsewhere.
Credit encourages laziness.
It asks you to take the road most traveled, and naturally the easiest road to pick.
Defering credit with minimum payments from month to month means that the minimum payment becomes larger and larger and larger.
The hole it is digging into your cash flow gets bigger by the month.
So instead of taking 20 bucks out of your pocket as it did in January, now it is taking about 40 bucks.
By June, you're up to 50.
People consider this kind of money a small thing but over time the amount of money spent goes up and up just to meet basic minimum payments.
The more you defer larger amounts, the more likely you are to need another credit card.
And what about those months where you heroically take a real chip out of the credit card's balance?Usually those months lead to less eating which leads to more credit being used.
So first thing is first.
Put the credit card in a drawer and I will explain how to figure out how much you can pay to what you owe, strategies to reduce the amount you're paying in bills and services as well as showing you that credit is unnecessary.
Say you get your paycheque and it is four hundred dollars.
That means, you can only spend 200 dollars on bills.
Half.
If you make 700, you can spend 400, slightly higher than half on bills.
That's the magical formula.
You need to stay near the half mark.
The next question has to be, but I can't pay everything off that way?Then, that means you have too many regular bills.
Time to start trimming your services.
Look at some of your basic service bills such as cable, telephone and hydro.
In the case of cable, get rid of anything above basic.
That'll give you a lot of relief.
Or better yet, phone them up and say you're hurting and will have to reduce services, they may well find a solution for you so that you can keep a little extra in services.
As for the telephone, do you really need to know who is calling you?My bet is no.
So forget call waiting and all of those fancy ring tones as well as call display.
If it comes to having a choice between having a phone and non at all, then I would pick a phone.
If your long distance is not a package, flat rate unlimited, then dump it and find a company that has that.
In the case of Hydro, think of looking for energy leaks.
For example, do you have a dryer that is from the dark ages?Do you have a washing machine that eats electricity on every load?What about a huge freezer?Dump them.
Replace them with more modern equipment.
Then move on, shop around for insurance etc..
You can always find that kind of thing cheaper.
Dump bills that are ridiculous for small amounts.
Pay them yearly instead.
Once you start using this formula for success, you will always have more money in your pocket and your need for credit will become a thing of the past.
The main thing is to always keep a certain amount of money available for spending, which is what we all do with money.
Then, you don't need a credit card.
This is yet another way you can live within your means.