Get to Know your Spending Habits

October 2, 2007 No Comments »
Get to Know your Spending Habits

If you’re like me, you’re probably always astounded at how much you charge on your credit card(s) in a given month.

Amazingly, all those seemingly small charges tend to add up over the 30 or so days in a given month.

And even when we think we’re behaving ourselves, those credit card bills continue to add up, even after brown bagging it or skipping our daily visit to Starbucks.

So what can we do to reduce our expenditures, or at least get to the core of the problem?

Well, one useful method to tackle your high-spending habits is to look at your year-end summary online.

Many credit card issuers provide free access to a year-end summary which details your total annual charges, broken down by month and category.

It’s really quite useful if you have no idea where all the money goes each month.

Typical categories include travel, dining, retail, auto (gas), cash advances/fees, and other (medical,entertainment).

Once you find out which category makes up the bulk of your spending, look for ways to reduce the output.

If your cash advances/fees category makes up a good chunk of your spending, you should consider a credit card balance transfer to a 0% APR credit card if you can’t pay your bills in full.

There’s really no reason you should be spending the bulk of your money on interest and fees, especially if you’re attempting to cut out the debt.

Also watch out for restaurant spending, which is the killer for me as you can see from the graph above.

If you eat out often, or even take a daily trip to Starbucks, the spending can really add up over the month, and will likely shock you over the year.

I’ve since began spending more at the supermarket, and less on expensive lunches and dinners out to tackle my expensive habits.

But notice my cash/fees section, which makes up less than one percent of my annual spending. I’ve learned how to avoid paying finance charges and credit card late fees by better understanding how credit cards work.

Regardless of your “problem category”, look for ways to reduce spending in that area to reduce debt and get back on the right track.

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