If your household’s lifestyle pushes you to keep spending income several months into the future, to live beyond your means and to rely heavily on credit cards, you probably have a credit score below 600. This puts the interest on your credit cards higher than 18% or at least an addtional annual expense of more than $2000 for every thousand dollars of credit card balance. This does not include penalties for late payments which you probably incur for almost every bill. This adds another $1440 to your annual expense for every thousand dollars of late payment.
So, set …read more

If your household’s lifestyle pushes you to keep spending income several months into the future (i.e., live beyond your means and rely heavily on credit cards) and are unable to save at least 5% of your monthly income, you are in DANGER.
You are living on the edge of a financial disaster. If any kind of emergency hits, you will need cash in a hurry; i.e., sudden sickness in the household (not covered by insurance or company benefit), a disaster such as a fire (even a small one which will need some repairs), a fire at your neighbor’s house which …read more

If your household’s lifestyle pushes you to keep spending income several months into the future (i.e., live beyond your means and rely heavily on credit cards), it is time to take stock of your expenses.
List down all your expenses. Be absolutely honest and categorize them into:
(a) necessary
(b) can be spent if there’s money left after paying for necessary expenses
(c) luxury
(d) keeping up with the Joneses.
Obviously, the best move is to stop spending at Category (a).
image from Microsoft Clipart

Credit cards enable you to spend future cashflow, income that you haven’t earned yet but expect to earn with some certainty (e.g., regular paying job, income from own business, etc).
Credit cards are temptations to live beyond your means. You are living within your means if you are able to pay off the entire balance in your monthly bill. This is the best position for you. You are, in effect, getting a 30-day loan from the credit card company interest-free.
If you are not able to pay off your entire balance and this balance grows from month to month, …read more