Sooner or later, your hole-digging spending habits will catch up with you. Soon, you’ll deplete your savings, max out your credit cards, and run out of places to borrow money. Keep your spending within your monthly income so that you’re living within your means and not creating debt. Reduce your spending below your income and use the extra money to pay down your debt. When you use these methods to pay bills and make purchases, you’re creating debt. If you don’t fully repay the debt each month, it will continue to grow. You can resolve this bad habit by reducing your expenses and relying only on your income to pay for your wants and needs. Emphasis on “needs.” The caveat is that you’re less likely to pay your credit card bill for items that you’ve already consumed, which most “ordinary” purchases are. Using credit instead of cash is a bad habit, especially when you don’t pay your credit card bills in full each month. Some credit cards have reward programs that let you earn cash, miles, or points by charging more on your credit card. If you choose to maximize your reward earnings by charging more, only charge what you would have purchased with cash, and pay off the purchase right away. To change this bad habit, you must be willing to pay for what you want with the money you’ve earned. While you can postpone payment by using credit, you’ll end up paying more than if you spent your cash. Balance transfers have transaction fees, and most loans have some downpayment or origination fees. So, when you use debt to pay off debt, you end up worse off than when you began. Using debt to “pay off” debt might be beneficial if you can transfer a balance from a high-interest rate credit card to one with a lower limit. However, be careful that the balance transfer fee doesn’t negate the interest savings and that your post-promotional interest rate isn’t worse than your previous rate. Transferring a balance once or twice to take advantage of a great rate is different from continually transferring balances to dodge credit card payments.
