Spending More Than You Make
When you spend more money than you make each month you are bound
to have money problems very quickly. The bad part is that most
of us never realize we are spending that much until it's too
late.
How many times have you used the credit cards to buy a TV,
school clothes and supplies, fixed the car, or any number of
things and not realized that you just exceeded your monthly
income. You may have even realized it but thought there is
always next month.
Credit cards are the biggest culprit but they aren't the only
way to spend more than you make. Things like payday loans or car
title loans also come to mind. Paying $15 to use $100 for a week
doesn't seem too bad. However, when you consider that you are
paying almost 400% in interest over a years time these loans
make interest on credit cards look like a great deal.
Normally, installment loans have a lower interest than either
credit cards or payday loans but they can still cause problems
if you aren't positive that you can make the payments each
month.
I consider a house payment and the purchase of a car the only
real legitimate reasons for paying interest. Very few people
have the means to make these purchases with cash. If you aren't
careful you can still get yourself into trouble by buying or
renting more house that you can afford or having car payments
that don't fit your budget.
I just recently received an email from a lady stating that her
and her husband wanted to buy a new car but really didn't know
if they could afford it. This family probably saved themself a
lot of headaches just by asking that question. I wrote back
showing her how they could determine if they could afford the
car or not.
My answer to her question was to have her develop a budget,
listing all of the other bills and expenses they have, and then
see what's left over. I also reminded her that she should
consider the extra costs like insurance, maintenance, etc.
Over the years I have seen people with as little as $500 a month
income manage their finances very well while someone else with
$5000 income can't make it last the entire month. It all boils
down to planning. If you plan your bills and purchases each
month with the goal of not exceeding your income, you can make
it on almost any income.