A budget is more than just a set of numbers in and another set of numbers out. It is if you treat it the right way, your roadmap to financial freedom and independence in a way that nothing else compares to. One of the most important things you can ever do is sit down with all your figures and prepare a watertight personal budget for your immediate circumstances and also your future.
Knowing where to start is often a daunting matter, especially if you are already in debt up to your eyeballs and can’t see the forest for the trees. Don’t let yourself succumb to that feeling of worthlessness. No matter what situation you are in or are facing, a personal budget is one way to take a firm hold of your finances and to deal with whatever issue you may be facing.
One important aspect of any budget is the level of income versus the level of expenses, and although I understand that many people have credit cards to deal with urgent essential costs, most people would be far better off without the cards, and visiting a lender offering pay day loans instead, when the need arises. Credit cards and lines of credit are by far the most costly of all debt that we as individuals incur. Sure the car and the house may be larger debts but the cost of that debt is far less than the cost of inefficiently operating a credit card.
We have been lulled into this false sense of security with credit cards, and out of that has evolved a generation of people who believe that a plastic credit card is an essential part of everyday life. In fact at one time not so long ago, it was not fashionable not to have a credit card. All of these people who have them have been manipulated by the banks and lending institutions that the credit card is the saviour of all their problems, and most have believed that. If you look at the statistics of how many people owe, and how much is owed on credit card debt, you would easily see that most countries would be bankrupt if everybody in debt decided not to pay. That is a very worrying concern.
So for me, the first piece of advice to those who are establishing a personal budget of their own is, “do away with the credit card“ if you can. If you have a reasonable income and few creditors, a credit card is not your best friend, but very well could be your worst enemy. By continuing to use a credit card you are simply saying “I want the things I can’t afford, and I am happy to pay someone a lot of money for the privilege of having them now”, and to me that is ridiculous. Credit cards will ruin even the best personal budgets, unless you are able to strictly monitor and use the card according to the terms of the lender.