Credit cards are one of the easiest ways to borrow money, but the most important thing related to it is – how do you manage your credit card expenses?
When you manage your credit cards and loans in the right way, it’s a boon. But when not managed properly you could find that your debts spiral can go out of control. This can happen if you’re not paying off your balance in full or before the end of free interest periods. The same applies to loans as well, when used & managed properly it can do wonders but when not managed properly it can be difficult to get out of debt.
Managing your credit cards & loans becomes much easier when you have good financial & money management skills. Here are a few tips that can help you manage your credit cards & loans effectively, and to make your financial life easier.
Tips to Manage Loans, Credit Card Spends
Track your spending
Keeping track of your spending is always a good habit. This way, you will get to know where your money is going exactly and hence you can modify your spending accordingly. By tracking your spending you will be less likely to overdraw your account.
Have a plan
Planning is important for everything, be it your studies, future or money. And if it’s about money, you can start with creating your monthly budget. Include all your expenses in it and try not to ignore your budget until it’s very important. When you are done with budgeting, it’s time to plan for repayment of your loans and credit cards if any. Your planning should include steps and financial management so that you can repay your borrowings faster.
Track your credit card spending
The credit card’s monthly statement provides a summary of all your purchases and spendings made through the card. Hence checking your credit card statement every month enables you to identify and take inventory of where your money was spent. This way you can get to know whether you need to cut down to it or whether the addition is possible. The most important thing here is identifying necessary and frivolous purchases made on your card. Doing this will surely help you to avoid unnecessary purchases in the future.
Calculate well, before you take a loan
Perhaps some requirements are unavoidable but still, doing calculations are a must before you avail any loan. This calculation includes- how much exactly you need, your plan to use the borrowed money and most importantly your plan how to repay the borrowed amount. You can use the EMI calculator to avoid errors and to get accurate results.
Prioritize your debts – credit cards, loans & mortgages
Willingly or unwillingly at some point of time we are trapped into debts. However, being in debt is never good and one should try to end it as soon as possible. The first step towards ending your debt is to- prioritize them.
Suppose you have credit card bills, a personal loan, and a home loan. Your first step should be prioritizing these debts- to do so calculate the total payable amount on each loan using an EMI calculator. Give first priority to the one which has a high-interest rate. Start saving for your priority loan and pre-closure them. This way you will be able to save some money which you would have paid on interest.
Keep credit card and Personal loan as your first priority
Priorities differ from person to person, many people want to get rid of their mortgage first while others have their highest interest rate debts at first. But the fact of matter is- mortgage loans have a low-interest rate as compared to credit card and personal loan rates. On the same hand mortgage loans are a generally high amount loan which takes a long time to repay. So, when prioritizing wisely- one should end their credit card debt first followed by personal loans and then mortgage loans.
Contribute to savings regularly: Saving money every month from your income can help you build healthy financial habits. Divide your savings amount into categories and then save percentage-wise from your income. This can be done as- save 10% of your income as an emergency fund, then for investment and for debts clearance. And when you are able to save a good amount try to fore-close any of your existing debts. And when you are investing try to opt for tax saving investment plans, this will again save some of your money and will yield you profit in the future as well.