Credit card companies use psychology to incentivize our use of credit cards. Understanding the psychology involved in the purchases you make every day, especially when credit card use is involved, and having a financial plan to manage your expense, will equip you to make better financial decisions that will keep you in control of your money.




Use a Budget to Avoid Credit Card Debt

You must get away from looking at the cash in your account as your base line. You have to get to the place where you live on the budget. Each budget category balance grows month by month to cover future expenses in clothing, electricity, car repairs, Christmas, birthdays, home maintenance, car replacement, car repair, etc.


You think you have an extra $300 at the end of the month, but really that money should be going into a saving account earmarked for future expenses that you know are coming.


New tires aren’t an emergency, vacation isn’t an emergency, pet grooming or vaccines aren’t an emergency, all of these things should be planned for in a savings tracker.


Have a savings account where money is accumulated each month for a variety of categories.  Tracks those categories in an online tool or use an excel sheet to see how much money is in each category. All the money is in one savings account, but the actual savings is being tracked across several categories.



I may have $3,000 in my savings account, but…

  • $500 is for house repairs.

  • $500 is for Christmas.

  • $1,000 is for future car replacement.

  • $1,000 is for vacation later in the year.

  • $200 is for upcoming pet expenses.

  • $400 is medical savings.

  • $400 is savings for my next phone.


Medical Debt

  • Medical debt almost always seems to be a part of credit card debt. Never put medical debt on a credit card. Never use a 401(k) loan to pay off medical debt, or use any line of secured debt to cover unsecured debt.

  • Hospitals don’t have a lot of leverage….almost no ability to collect from you.

  • Credit cards have some leverage, but it’s a lot of work for them, so they wait a long time to use it.

  • Your mortgage company has big leverage against you.

  • Medical charges are ALMOST ALWAYS negotiable

    • Cost of medical care is inflated to make up for those who cannot pay.

    • Whatever the charge is, it can usually be lowered.

    • You won’t get a discount if you don’t call. (Example: Ambulance charge for Leo’s daughter $575).

    • People with lower incomes qualify for reduced or free care.

  • You can offer payment for medical bills of $20 a month, or $10 a month, or even $5 a month.

  • Don’t be afraid to get aggressive with the medical facility or talk to your doctor about a cheaper treatment option. Especially for ongoing care that include expensive tests and procedures - Shots, MRI, Scans, every 6 months, etc.



Budget Forms
Debt Payoff Plan