What are problems associated with credit card use and the importance of budgeting?

The simple answer is MOST people like to live beyond their incomes. When you work for a paycheck it is very difficult to become financial independent because you will alway spend up to your disposable income.

You may laugh but I have worked with Doctors making over $ 200,000 a year and very little in savings. Why? They must have the $ 1,000,0000 home, 2 BMWs loans, studant loans, and etc. It is no different than a person who makes $ 24,000.

I am not very good at budgeting but I have a trick that I use from the book “Rich Dad’ Poor Dad” that if you want to buy an item and it does NOT make you money then it is an expense and you should try and pay for it in cash. Even though your home may have tax deduction, as many Americans have discovered if you lose you job and are only living paycheck to paycheck that foreclosure is a very real possibility.

Credit cards are a great way to buy now and pay later. The issue is most people do NOT pay later and when this happens your interest rates and fees go through the roof. Now you are paying more for the item through APR. If you make the payment late it could effect your credit score. A bad credit reputation may keep you from getting a job in a tough market. The best guess is that between 40 percent and 50 percent of employers are running credit checks on “would be” employees. And we’re not just talking about for jobs in the financial sector.

5 Warning signs you may be in financial trouble

Credit counselors actually wish people would visit them earlier than they do. “If people wait too long, they get into a circumstance in which there’s very little that can be done to help them, short of bankruptcy,” says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies. “But there are a lot of opportunities if they get help early enough.”

Here are five early-warning signs of credit troubles that could make it a good time to get help from a credit-counseling agency — or at least make some major changes in your spending habits.

1. Paying only the minimum amount due on your credit-card balances for two months in a row. Paying just the minimum kills you with interest charges and can extend your debt for more than a decade. If you have a $ 1,000 balance on a card that charges 18% interest, for example, and you pay the minimum of 2% of your balance each month, it would take 19 years for you to pay off the debt and cost nearly $ 2,000 extra in interest (twice as much in interest as you owed for the original balance). Many lenders have been boosting their minimum payments from 2% to 4% or 5%. But that could be tough to pay on time if you aren’t prepared, leaving you with late fees, a higher interest rate and a lower credit score — and making it even tougher to get out of debt.

2. Regularly charging up to your credit limit. If you routinely max out your credit cards, then your spending is probably getting out of control. And creditors view this practice as risky, so they’ve been increasing interest rates and lowering the credit limit for people who charge the maximum — and that, in turn, makes it tougher to get out of debt.

3. Charging essentials without a payoff plan. Charging essentials, such as gas and groceries, on your credit card isn’t always a warning sign. Sometimes it’s just better than carrying around a lot of cash, and it can earn you valuable rebates from your card company. As long as you pay off the bill in full by the deadline, you won’t owe any interest on the charges. But if you routinely charge essential expenses and don’t have a plan to repay those bills in 90 days or sooner, then it’s often a sign that you’re living beyond your means, Jones says. It’s time to review your budget and find a way to pay for your essential expenses without going into debt.

4. Not knowing your monthly expenses. Some people come to credit counseling knowing how much they’re paying in major monthly bills, says Jones, but they have no idea how much they’re spending every day on extras, such as food, lunch, coffee and clothes. They also tend to leave out utility bills and insurance premiums from their calculations. Before you can get a handle on your debt, it’s important to know exactly where your money is going. “There are so many things people don’t realize that can take a lot of their disposable income, and minor changes can be made that give them the extra money they need,” says Jones.

When people add up how much they’re spending on coffee and lunches out, for example, it gives them an incentive to cut back and save the extra cash. Switching cell-phone plans — or limiting your kids’ text-messaging bills — can also save a lot of money. “I think it’s important to be honest when they do a budget,” says Jones. “They have to look at the things they might have considered to be necessities in the past but now might be luxuries, like the extra $ 75 in cable television,” says Jones. He also recommends limiting debt — not c