How to Avoid the Credit Card Trap, Part 1

How to Avoid the Credit Card Trap, Part 1

Credit cards have only been around for 100 years. They began innocently enough, with the goal of allowing you to pay for purchases at limited stores without having to have cash. Diners’ Club was the first universal credit card that made its appearance in 1950. It gave people the ability to dine at restaurants who accepted the card and not pay with cash. The idea caught on, and now the credit card industry is big business with the estimated amount of debt being $1 trillion dollars sitting on credit cards as of mid-2019.

Anchor Wealth Management is a wealth management company that helps individuals and businesses form comprehensive financial plans so that they can reach their financial goals. Part of our financial planning is helping people get out of debt and free up more money to build wealth. Below, we’ll offer up some tips on how to avoid the credit card trap. Contact our financial advisors to learn more!


Have a Budget

Many people have no idea where their money goes every month. They get a paycheck, and then they just start spending, sometimes running out of money before they get paid again. So to cover the gap, they use their credit cards, intending to pay them off when they get paid. However, many do not, which is one way you can get trapped in a never-ending cycle of credit card debt.

The financial advisors at Anchor Wealth Management recommends that you set a budget. A budget will put a value to the items that you spend money on so you won’t overspend. If you’ve never done a budget, we recommend tracking your income and expenditures for one month. This will tell you what you spend your money on and when you overspend. If you are spending more than what you earn, then you will need to assess your expenditures and budget accordingly.

Some expenses, such as your rent or mortgage and utilities are relatively fixed and necessary. You will have to make adjustments to your discretionary income, which is the money you use for entertainment and to buy the things you want, and the area most people do not want to cut. Budgeting is never easy and sometimes not fun, but if you want to be financially independent and free from credit card debt, it is absolutely necessary.

Only Buy What You Can Afford

People who have a large amount of credit card debt probably do not restrict themselves on what they can buy. They buy whatever they want when they see it. Thus, when they go shopping with friends, they drop $500 on clothes and splurge on a big screen TV — using their credit cards to pay for it. This can get you into debt fast if you continue to finance big ticket items using your credit card.

Our financial advisors recommend that you save up the money and pay cash for the bigger ticket items you want, such as a gaming computer or a designer purse. Not only will you appreciate the item more, but you won’t pay extra money on the interest accrued and you’ll avoid the credit card trap.

Build An Emergency Savings Account

Some people find themselves trapped in the credit card trap because they had an emergency expense crop up, such as a major car repair, a water heater go out, or they had an unplanned medical expense. If you have a couple of emergency expenses close together, you may end up in the credit card trap.

You can avoid emergency expenses going onto a credit card that will cost you in interest expenses by having an emergency savings fund set up. This is ideally at least $1,000 to begin with. As you add to it, you eventually want to build up to six months of living expenses in your emergency savings to cover a major emergency like a job loss. The financial advisors at Anchor Wealth Management can help you implement a plan to accrue these savings plans. Call today to get started.


The financial advisors at Anchor Wealth Management firmly believe that to create wealth you need to be debt-free, outside of your mortgage. Interest you pay on loans and credit cards is all money you could be saving and putting towards your comprehensive financial plan to be financially independent as you head into retirement. Credit cards only make money when you pay them interest and fees, so they do not have your best interests at heart. In fact, they hope you never get out of credit card debt, which is why it can be exceedingly difficult to climb out of the credit card trap once caught.

Our financial advisors want to be your anchor, even if you feel you are drowning in credit card debt. Call either our Rockford or Lanark office for a free consultation. We’ll sit down with you, evaluate where you are at financially and where you want to be, and paint a rough outline of how we can help. Once you partner with us, we’ll develop a comprehensive financial plan to meet your wealth building needs and still allow you to enjoy life. Once your financial plan is set, we’ll help you stay the course, adjusting the course as needed and always doing right by you. Our wealth managers take it from here, always doing what we believe is right for you. We aim to be nimble, yet resolute in our desire to set your path towards financial independence.

Many people have the wrong impression that a budget and a financial plan restrict their lives; in fact, it’s the opposite. When you have a budget and a comprehensive financial plan, you tell your money what to do, not the other way around. You have control, and soon you will be floating on top of the water and not sinking. Call and speak to one of our financial advisors today!