Break your credit card

1. If we spend what we earn, we can never have an emergency savings fund.
2. Furthermore, if we spend more than we earn, then we will need to borrow money to finance the excess spending.
3. If these costs are recurrent we have to return the borrowed money in ever smaller amounts and longer term.

In each of these situations, creating a pool of money that allows us to save for contingencies can be impossible.

Therefore, before creating a short-term savings, we have to solve our problems with credit cards.

If you're in the situation (1) , I recommend you do a detailed analysis of your expenses and to differentiate those that are essential expenses (mortgage, school children, food, household supplies, etc ...) of those who do not are. Only by adjusting the latter, we can start saving.

It is true that not all months are going to spend the same and that there will be months that expenses exceed our revenues slightly (2) . The problem here is the easy to use (credit card) rather than creating an emergency fund.

The problem with credit cards is that they have a perverse effect on our finances, since any money you have our card (unless you have payment later this month) we will have to return with their interests (such interests vary depending on the card and the interest rates, but usually around 20% APR)

Imagine a person who has a debt in his credit card of $ 2400 and he pays $ 120 each month to cancel the debt, broadly speaking, the client will take more than 2 years to repay the loan and will pay more than 500 € in interest.

Could you create a short-term savings if you pay € 500? As this amount is what you save in the event that you had the savings and did not have to resort to credit card under the above conditions.

Have I convinced you to break your credit card or at least not have it at hand?