Thursday, September 17, 2009

(81)---How important is credit card debt management?

After what the economy has been reeling under, how can one undermine the importance of credit card debt management? It can also be said the other way round. How important is money management whether you use plastic money or cash. A credit card is money in disguise!

Of late there has been a lot of hue and cry about effective credit card management skills and managing credit card debts. It has been observed on several instances that even if you have mastered the art of money management, you may encounter unforeseen events that can sweep you off the ground. How you rise up to such a situation and how well you are equipped to counteract the financial crisis essentially reflects your money management skills.

Credit cards can be your foe or friend depending on how you use them. It is very important to keep in mind that whatever you do with your finances gets recorded in your credit report. And there is a close association with your credit score and your financial well being. Your credit score also indicates how financially responsible you are.

Given below are few measures that you can adopt to remain financially in good health

  • When you use credit cards, you are using someone else' money, so how can you misuse cash that doesn't belong to you. But that is what most of the consumers do. Use credit cards only if you are in dire need of cash. Just because you have been allowed to use credit doesn't necessarily mean that you have to exploit it.

  • After fulfilling your financial obligations each month, make sure you keep aside some cash for building an emergency fund. You will realize the importance of an emergency fund only if you face financial hardship.

  • Avoid taking fresh credit unless you are done with your existing credit card debts. When you are making payments for your monthly financial obligations, make sure you don't strain your purse. Maintain the comfort level in making payments. In other words, live within your means.

  • As far as investment is concerned, choose an investment vehicle that will give you good returns. This may not be possible if you are a beginner. But you can always take help of a stock/forex broker to get best returns.

  • Keep aside money for your retirement.

You will manage your finances well only if you are aware of the consequences of money mismanagement and what it can lead to.