Unless you track your overall spending with every little purchase, debt can ambush you. Fortunately, you can prevent it from piling up; you just need to be aware of the ways in which you spend money. Here are four common causes of debt that aren’t always obvious:
1. Lack of a budget
If you don’t know how much money you spend every month, you may be in for a world of hurt when that credit card bill arrives. Check your card and bank account statements to start tracking your expenses. You may be spending more than you think on things you can afford to do without. Make adjustments and budget accordingly. And be sure to check out your Credit Union’s best-in-class budgeting tool. It will make light work of tracking your expenses―and staying on track.
2. Taking trips on credit
It’s great to get wrapped up in vacation fun—just make sure you’ve budgeted for it. Try to plan your trip ahead, tallying up airfare, lodging, and daily expenses. Otherwise you’ll be tempted to spend too freely with your card and only worry about it when you get your statement and are in a world of hurt. One great way of staying within an affordable budget is saving up. We make this easy with our My Account savings club – to help you save for whatever matters. Give your savings account a name, e.g. Hawaii Here I Come, and regular automatic deductions soon add up with healthy interest to cover some or all of your vacation budget costs.
3. Never saying “No” to your little ones
It’s never easy to say “No” to your children. But if you rely on credit to satisfy their every demand, you could be hurting your family finances. If you know they’ll want to attend a certain camp or play sports during the upcoming school year, start saving now. Getting them familiar with money and its management may also help. The Credit Union has a range of age-appropriate accounts for younger members. You’ll like the fact that they can access their “own” savings rather than ask you for cash. And you’ll love the entertaining money clubs and newsletters that come free with our youth accounts to help them learn about money while having fun. Learn more.
4. Paying debt with credit
Transferring balances to lower-rate cards, and debt consolidation loans, can help you reduce debt. They roll this into a lump sum at a more affordable rate. However, make sure you can pay it off. For example, let’s say a promotional rate expires on a credit card, and the APR jumps. If you can’t afford your new interest rate, you may have to transfer the balance again. If you’re using credit to pay debt, always have a plan in place. Your Credit Union has some unusually low-rate Credit Cards, with everyday rates (not promotional) as little as half or less those charged by banks and retailers. We also have a low-rate Signature Loan to help consolidate and cut debt.