subject: Simply Lessen Credit Card Debt With Risk Management Methods [print this page] Simply Lessen Credit Card Debt With Risk Management Methods
Risk management is the practice of assessing the potential outcomes of any given situation, and taking steps to ensure that the probability of negative outcomes are substantially diminished. In this particular article, I'll review a specific case of risk management as it pertains to credit card debt. Credit card debt is without a doubt one of the biggest sources of anxiety and worry today. It has destroyed marriages, homes, and lives. By taking some simple steps, you can learn to avoid it. The primary step is when you are about to make a decision. Since we're talking about credit card debt, this is when you are considering buying something on credit. This step entails stopping a moment, and considering all the risks involved, specifically the worst thing that can happen. By stopping just for a few moments before you make any purchasing decisions, you cans save yourself a lot of headaches down the road. In the case of buying something on credit, what is the worst possible thing that can happen? For many people, it's buying the item, then receiving the bill a few weeks later, only to find there isn't enough money to pay it off. So you make the minimum payment. The same thing happens month after month. Eventually you wind up paying three or four times the original price of the item. The next step is to determine how likely this is to happen. What are the odds of you paying only the minimum amount on your next credit card bill? The best way to determine this is to look back over your previous payments. Where they for the amount in full, or only the minimum. This is a good indication of your ability to pay next time. Once you've figured out the worst possible outcome, along with the likelihood of it taking place, the next step is to try and minimize it from happening. In most cases, this is simply to not make the purchase. Of course, this is much easier said than done. One trick is to think about it over night, and if you still want or need to buy it in a day or two, then go ahead and make the purchase. Another possibility is to pay cash for the item. If this isn't possible, then you can move on to the next step. The final step is to prepare yourself to accept the worst possible scenario. In this case, that is not paying your bill off in full, and making the minimum payment for several months. This means the actual price you'll pay for the item is several times what the price tag says. So multiply the price tag by at least four, and ask yourself it's still worth it. If it is, then go ahead and purchase it, and prepare to be paying for it for several months. If you decide it isn't worth it, then you've made a wise decision using risk management, and have saved a significant amount of money.
