Wealthy people take charge of their debt, and they use debt sparingly to create leverage.
Seldom do they carry credit card balances month to month.
If frequent debting has become your bad habit, here’s how to get a handle on the problem:
- Take your credit card statements from last month.
- Use your Cash Flow Statement, and in each category where you’ve charged something, write that dollar amount in parentheses.
- Total the charges in each category for the whole month.
Now, on a separate sheet of paper make a list of the total charges in all categories. See where you are charging the most money, and ask yourself, “Could I pay these expenses with cash, instead of charging?”
If you can, start doing that.
The other option is that you pay off each month’s charges, every month. You must stop creating new balances on your credit cards.
If you pay off your cards completely, hooray! But you still need to list what you’re charging. So at least do the first part of this habit exercise. You’ll see where you’re charging, and you may want to change some of those charges to immediate cash outlays.
Next, Habit #6 – Paying Off Credit Card Balances