I grew up with the typical middle class lifestyle, but the only reason we were able to do that well was because of credit cards. I probably should have viewed the cards as a godsend, and I did at first, but I quickly saw how fast things got out of control. There were dozens of cards being maxed out regularly with no regards to personal finance, and while I didn't know anything about a credit score at the time, I saw firsthand how those cards can ruin lives. It's as if one minute everything is fine, then the next you can't even find a place to live because of some random number. It was at that point that I vowed never to use a credit card, ever.
As I became an adult, I realized that my vow wasn't realistic. I was living paycheck to paycheck and life has a way of throwing unexpected curve balls at you no matter how well you manage your personal finances. A broken car here, an unexpected doctor visit there, all those costs add up. That's why I decided to get a credit card.
Credit cards still seemed very scary, so I made a list of rules that I forced myself to follow. The first rule is that I would never use a credit card on something that wouldn't be here in a month. For example, I've never used a credit card to go out to eat, buy a concert ticket, see a movie, anything like that. I don't care if I'm dining at a five star restaurant, the idea of paying off a meal well after it's been digested just seemed silly to me.
The second rule was that I'd only use my credit card for emergencies, but I quickly had to tweak that a bit. It's true that a credit card is very useful if you run into unexpected expenses, but the idea of maxing out my card scared me. Instead, I agreed that I would use to card if needed, but in addition to this, I'd also set up an emergency funding account. Each week, I'd put at least a few dollars into the account. Some weeks I could only spare $5, others $50. Regardless, I saw the emergency account as one more way to take control of my personal finances, which helped to put my mind as ease.
When it came to big purchases or bills, I only wanted to use my credit card as a last resort. The perfect example of this is when my dog got sick and had to be taken to the vet. The bill was $200, and while I could have put that on my credit card, I knew I wouldn't be able to pay it off right away. I decided instead to give up my days off and work as much overtime as possible so I could pay for the bill with cash. While I could have done this in addition to paying off the credit card, I find that I'm much more motivated to work harder if I haven't already paid for things.
The next rule is one of the most important to me even though it doesn't usually affect your credit score. When I use a credit card, I give myself exactly one month to pay off the entire purchase. The reasoning being, if I can't pay something off in a month (with the exception of it being an emergency), I probably shouldn't be making the purchase. Credit cards make it easy to only focus on short term benefits, but this rule helps me focus on long-term as well.
My last rule is that I never want to be charged any additional fees, ever. I just don't have the money to spare on that. This means that I avoid paying late, which also helps to keep my credit score up. To remind myself when a payment is due, I programmed my computer calendar to email me a week in advance. My cellphone alarm also reminds me three days beforehand should I forget about the email.
It's taken me most of my adult life to master these rules and take control of my personal finances, but it's definitely been worth it. While my credit score isn't a perfect 850, it is just over 800, which I'd say is pretty good considering.
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