Buying on credit is the easy way to acquire. However, it is not the smartest thing to do. Essentially, you are spending money that you do not have. In exchange for having access to credit, you will be charged interest on your purchase.
Thus, you end up spending more for the item you bought. And if you purchased an expensive item on credit – a car or a house – you may end up losing more than the asset and the shirt off your back.
People use credit because they do not have the cash to carry out the purchase. Even if they do, they are afraid of losing a big chunk of cash as it will make them less liquid. So, they apply for credit on the assumption that they can easily pay off the loan over the course of the agreement.
As we all know, this type of story does not usually have a happy ending. Borrowing money entails risk. You are basically hedging on your future. If things don’t go as planned, you could be in a world of financial hurt.
If you can pay cash – pay cash. By all means, avoid debt. When you acquire with credit, you also acquire debt. It gives you one more thing to worry about every month.
A better course of action is to learn how to save. By saving consistently, you improve your liquidity – you will always have cash on hand. According to a study, only 39% of Americans have enough savings to cover a $1,000 medical expense.
People are hesitant to save because they have conditioned their minds to believe it is hard.
We are here to tell you that it is not hard to save. Here are 10 ways to save money:
- 1. Open an account that is dedicated for savings. After you’ve paid off your bills and other monthly obligations, keep 20% of the balance as savings. The rest? Look for safe, conservative investments or placements that earn higher interest than a savings account.
- Turn off all unused appliances. If no one is using the room, turn off the lights, television set, and other electrical appliances.
- Stop eating out – brownbag to work. Not only is it cheaper but preparing your own food will give you the opportunity to eat healthier meals.
- Can’t function without your early morning caffeine-fix? Brew your own coffee at home. It is much cheaper than buying a $10 cup of coffee.
- Consider running your business online. It will save you money on rent and utilities. There are apps that can help you manage your business tasks from the comforts of home. For example, Asana and SalesForce for project management, Skype and Viber for communication, and DropBox for file sharing.
- Never buy on impulse. Do you really need the latest smartphone? If your phone is still working fine, don’t replace it.
- Try not to spend for an entire week at least once a month.
- Go for generic medicines and unbranded food items.
- Cancel unnecessary subscriptions and memberships. Netflix or Cable? One must go!
- Switch to energy efficient fixtures. They might be more expensive but your expenses will eventually be covered by cost savings.
It is not hard to save money. All you have to do is take that first step.