At certain times of the year, we as consumers are encouraged to spend money. The festive season in December is by far the biggest financial drain. Then January rolls around, and if you have kids, you are met by all the ‘back to school’ expenses. Next, Valentine’s Day arrives, and before you know it you’re buying Easter eggs!
During these times, we are prone to Reckless Spending, often on a credit card. We all know the symptoms: The holidays and special events come, causing us to reach for our credit cards more often than we should. We end up swiping, sometimes without even keeping track of how much we’ve spent.
The reality though, is that after every credit card, or store credit spending spree, the goods in question still need to be paid for. At the end of the month, if you are unable to settle the outstanding amount in full, you end up adding the new installment to your budget. Essentially setting yourself back months. Paying for things that, quite possibly, no longer have any value.
As an example:
Purchasing groceries on your credit card essentially increases their cost. If your credit card interest rate is 20%, you end up paying 20% more for your purchases.
Try making this a rule:
If I can’t pay for it with cash, I shouldn’t pay for it with a credit card.
It would undoubtedly help prevent problems with debt from cropping up in the future.
To help you figure out if you have fallen into the habit of reckless spending, find any two statements and review each item that you purchased. Then, allocate it to one of the following categories:
A – I would buy that item again today
B – I am not sure it was worth buying
C – What was I thinking?
If more than a quarter of your purchases end up in category “C” you just might be a Reckless Spender.