Until I started making smarter financial moves, one of the things I did regularly was use credit cards. Most of us have been there. It started as just wanting to “build my credit” a little bit, then I started using it for things like gas, and then the occasional dinner out, and then Christmas presents. All of a sudden I found myself bumping into the max balances on a couple of my cards. The dangerous thing is how easy it is to simply open another card and continue the trend.
One of the most powerful shifts that I saw in my finances was when I started implementing a cash buffer, or cushion. We decided on $1,000, but it could be whatever amount you are comfortable with. The power of it comes out when the unexpected arises in life, which it always does at some time or another.
Say you are cruising along, making progress on your financial goal of eliminating some debt. You’ve got your expenses from month to month, but one day your car starts making a noise. It gets worse and you find yourself at the shop. They tell you it’s going to be $650 to get the issue repaired. If you are living on credit cards for these kinds of expenses, you pull out the plastic and dig a deeper hole for yourself. OR, you tap into that cash cushion that you’ve cleverly saved up. Now you can pay cash for the repair, and still have a couple hundred dollars left just in case. You survive the rest of the month, and when the next paycheck rolls around, you can simply replenish the cushion fund.
Using this cushion helped us get off of credit cards once and for all. As unexpected expenses arose, we had the flexibility to keep the credit card in our pocket and instead pay cash (we use debit cards, but you get the idea).
Credit cards debt has a very nasty way of sticking around longer than we want it to. An expense that we expected to pay off with no interest in 30 or fewer days trickles into the next month, and the next, because you know, life hits. Before you know it your $650 repair ultimately costs you $800, $900, maybe more after interest is applied.
If you are wanting to start making progress on putting your credit card away and keeping it there, this is the place to start. Establish a financial cushion for yourself and you’ll be surprised how much less you’ll need your credit cards. Paying off credit card debt starts with putting the card down and not using it. It may seem obvious, but it took me a long time to figure out, and I can only speak from experience.
Why not start your financial cushion fund today?