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FP Article 24 (To sign up for a FREE 6-lesson eCourse on Defeating Credit Card Debt, please click here.)

Credit Cards - Fiscal Vampires

by Rajen Devadason

Without frugality none can be rich, and with it very few would be poor.

Samuel Johnson

  Receiving that first credit card has become a rite (and some might even say 'right'!) of passage for young adults in our advertising saturated era.

Yet in a sense, credit cards are a phenomenal invention. Through a global network of electronic linkages, we could be carrying one issued in Kuala Lumpur buying a handcrafted watch made in Switzerland at a mall in Los Angeles. The real danger, however, of carrying credit cards is the 'disconnect' that often occurs between our brain and our wallet!

 

 

 

 

 

 

 



That's why I believe there are times when misused and overused credit cards act like little plastic vampires that suck the economic life out of us! I'm specifically referring to the tendency many of us have to blow our carefully crafted budgets - assuming we have one (and we should) - simply because an easily slid out credit card from our wallet permits us to make one impulse buy after another.
 

This is an article on the genuine dangers credit cards pose to personal budgeting. I hope you enjoy reading it. But if it isn't what you're looking for, you're welcome to search for something that better meets your needs. Thank you for allowing me to serve you.

Rajen Devadason

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The fancy term 'fiscal' is often used interchangeably for 'finance' or 'money'. To be completely accurate, though, fiscal refers to a budget. So just as an economically healthy country needs to exercise fiscal responsibility, an economically healthy person should exercise budgetary discipline.

The reason this article is entitled Credit Cards - Fiscal Vampires is to drive home our need to slay credit card debt with as much fervour as a movie hero might plunge a sharpened wooden stake into the heart of Count Dracula!

Credit cards, when they are utilised in a less than healthy fashion, suck the very lifeblood out of your long-term financial dreams, hopes, aspirations and goals through accelerated negative compounding.

The Certified Financial Planner Board of Standards states: "Financial planning is the process of meeting your life goals through the proper management of your finances." If you reread that famous definition slowly and mull over each word, you'll notice there exists the high likelihood of not achieving your life goals if you mismanage your money.

The first tool you need to craft for yourself, if you wish to wrest back control of your financial destiny, is a soundly structured budget. Do not begin too ambitiously. For a start, aim for fiscal balance, meaning your cash inflows exactly match your cash outflows.

Once you do that, then look carefully at each line item of your budget and decide which ones can be eliminated and which ones shrunk in size. The moment you put those thoughts into action, you start generating a cash flow surplus. Congratulations!

Over time, you may use that accumulating surplus to first create an emergency buffer fund, then save, and finally invest. All these activities are linked and looped together like a money chain.

The links of this chain can most easily be wrenched apart by uncontrolled, profligate credit card spending. So, if you have fallen into just such a trap, now is the time to remind yourself that your long-term financial health is far more important than any near-term, short-lived thrill of spending money you don't yet have, using plastic with vampire-like traits, to buy pretty baubles you won't care about a week from now.

The time has come for you to fight for and win back your personal financial destiny. The first blows you want to land on your primary fiscal adversaries should be delivered through a structured debt management plan. If that's what you want to do, read this important article to find out if you currently are an Intelligent Borrower or Economic Slave. Alternatively, carry out your personally focused research for additional strategies and principles to help you defeat credit card debt either offline at a library or big bookstore near you, or online via appropriate searches.

I wish you great success in slaying your personal fiscal vampire by slamming a metaphoric stake into the heart of credit card overspending. In closing, here are 5 useful strategies to help you do just that:

1. Eliminate unnecessary credit cards that cost you too much money each year in fees;

2. Stop making impulse purchases with your credit cards. Instead, begin carrying sufficient cash for normal expenses;

3. Recognise that carrying cash and spending it is qualitatively different from whipping out a credit card. Most of us find it more difficult to spend cash, which we subconsciously associate with 'real money' as opposed to so-called 'play money' inherent in credit card transactions.

4. Ensure all required minimum payments are made each month; and

5. Accelerate payments using any extra cash flow extracted from your newfound fiscal discipline to pay down your existing credit card loans. Do so in order of size, from your tiniest credit card balance to the largest!

 

© Rajen Devadason

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Rajen Devadason, CEO RD WealthCreation Sdn Bhd & RD Book Projects
349, Desa Rasah, Jalan Bayan 7, 70300 Seremban, NS, Malaysia
Tel/Fax: +606 632 8955

 
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