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In light of the environmental crisis afoot in the Gulf, it becomes clearer and clearer that steps need to be taken to protect ourselves well in advance of a problem’s appearance. As much as this applies to offshore drilling and many other environmentally-destructive industries, there are lessons to be learned in your personal finance as well.

Much like a gushing well deep under the ocean, unmonitored credit debt swells and compounds on itself until it becomes so toxic that your finances may not recover for years. Worse still, there usually is collateral damage to other things as well like your standard of living and ability to take out loans for school or things you need. Therefore, prevention and careful planning becomes paramount to harnessing the power of credit for good and avoiding nasty consequences for its misuse.

Here are a few basic guidelines to follow that are common sense, but important to keep in mind at all times:

1. Never charge more than you can afford to pay off within 3 months.

In many blogs, you hear, “Don’t spend money you don’t have!” While this is very true, in many cases it just isn’t feasible due to the dollar amounts of various goods. Consider a TV for example: a large, generic branded TV costs anywhere between $600 to $1,500. Do you have $1,500 sitting around to spend all at once? Probably not, but I’m sure it if you were to pay it over 3 months it might be a lot easier to afford, right?

2. Pay more than your minimum whenever possible.

Without going into too much detail, every little bit you chisel off your outstanding balance reduces how much interest you will pay and even how large your future minimum payments will be. If you end up with an extra $100 at the end of the month, send it over to your credit card and reap the rewards. If you want to learn more about benefits of paying over your minimum, read this blog: The Secret Benefits of Paying More than your Minimum

3. Only keep a high credit limit if you know you will be responsible.

That sounded a little parental and I apologize for that, but it’s a very important statement. Unless you have self-restraint to not max out your card, intentionally set yourself a lower-than-normal credit limit to avoid overspending. $200 or $300 is good for a college student; it is high enough for small expenses, but low enough to not get you in trouble.

Similar Posts:

• The Secret Benefits of Paying More than your Minimum
• 3 Tips for Managing Credit Card Debt
• How NOT to Get and Keep a Great Credit Score
• Debit Card vs the Credit Card
• Credit Card Debt is Expensive