While there's some great advice here, I'm going to deviate a little and say...don't be afraid of credit/debt. And by that I mean, use it to your advantage and don't let it use you. My introduction to credit started when I was in college and would see various FI with pop-ups throughout campus offering all kinds of freebies to us broke college students. I only actually applied for 2 CC, but because I was good with my credit, I received 4 additional cards in the mail. All I had to do was activate the cards. I got in trouble when I went to law school and had to quit my job my first year (it was a requirement). Needless to say, none of my creditors were understanding which was extremely frustrating considering I had an excellent payment/credit history prior to that. This completely soured me on CCs in general. Fast forward several years later. I went to join my local CU (after checking my scores on Credit Karma) only to be shocked by very low score for clean reports. I then came to this board and realize my issue and began taking steps to improve my scores by acquiring CCs/debt. I use my CCs often and always PIF (well before this past year). My scores jumped from low 600s to high 600s after just 6mths. And in a year I was in the mid 700s. I could not have gotten there had I continued to be credit/debt averse.
Then a few years ago, I needed a new couch and found one online. I went to the store (VCF) to purchase and had every intention to just buy the couch on my CC for the rewards and PIF per my usual. However, when I got to the store, I saw a few additional items that I wanted. The store had a promotion that allowed %0 APR for 3yrs on their CC. I knew that I could have the debt paid off before then, so decided to use credit to my advantage. I app'd and received a SL twice what I needed to purchase the items. I made my purchase, and from what I learned from this site, immediately called and got my SL increased so that I didn't have 50% util on one card. It felt really odd for months holding the debt because I was still somewhat debt averse, but eventually, it got easier.
So my advice would be to live with no debt, sans your mortgage, for awhile. Just marinate in what that feels like. Address any possible issue that you may have that could lead to poor decisions and then once you're comfortable don't be afraid of credit/debt and use it if you need to.
Research indicates that when you use a credit or debit card, you aren't as conscious of how much you are spending than if you pay in cold hard cash.
So my suggestions would be
- Do not carry any plastic with you except maybe a gas card or low limit credit card so if you're stuck somewhere and need a tow.
- when you're out and about, pay cash and keep the receipts so you can log what and how much you're spending
- delete all credit cards from online shopping websites like Amazon so if you want to buy something, you are forced to slow down, enter the information manually which will give you time to assess impulse buys.
- Send direct deposits automatically to CDs or banks where you don't have ready access... out of sight, out of mind. If you want to withdraw, make it a hassle... kind of like overeating and not keeping junk food in the house.
by becoming conscious of every single dollar you spend, making the money you do have harder to get at, you'll become more aware and hopefully slow down and rethink urges and impulse buys.
Just my humble opinion coming from someone who isn't good at practicing what she preaches!
Think it might have been mentioned, and it sounds counterintuitive, but pay youself first.... decide on an amount you will save every month, and put that into savings as if it was just another bill.... it doesnt have to be much.... even though im pretty good with my finances, i made this a rule as per advice on another website.. and its been useful and even saved my butt a few times... and pretend it doesnt exist... when it starts pouring... it will be there.. or a miscalculation or a bill higher than you expected... it will be there...or an emergent/urgent issue...
Can also top it off if you get paid more than one time a month, or throw in more after everythings settled out for the month..
-J
