Budgeting with Credit Cards

Budgeting with a credit card is much the same as budgeting with any other source of finance. There should be no difference in the way that you budget the money you spend on your credit cards from the money you spend with any other funding source.

Households should budget on a monthly basis because this allows you to plan how you spend the money you get from you income, regardless of how you get paid. A monthly budget is always a good idea. Long term budgets are also helpful, but these generally won’t include the day-to-day living expenses that we include in a monthly budget. A monthly budget should be divided into saving and spending. A lot of the time, everyday Americans don’t have that much left over after we take out all of our living expenses. However, it’s always good to have some money left over just in case. Also, you may need some extra money put aside for when tax time comes around in case you need to pay a tax bill, which needs to be included in your monthly budget.

When you work out you monthly budget, you need to take into account all your expenses. This includes living costs, rents, mortgage repayments, shopping, loan repayment, and everything that is an expense. You then need to take around 10% of that and have that as a surplus in your bank account. The rest you can save through whatever means you wish. The reason you should do monthly budgets is that the cost of living can change in a month, such as if the Federal Reserve lifts official interest rates. Also, when budgeting monthly or long-term, the advice of a financial planner can really help, as they can give you tips and tricks on how to most effectively budget your finances.

Once you have your budget worked out, then all there is to do is to spend the money you need to spend and save the money you need to save. The spending part is where a credit card comes in and, as a consumer, you should view your credit card just like any other source of funding. It shouldn’t be seen as something you can use when your bank account can’t afford to pay for whatever you’re purchasing. That’s why a budget is so important.

The most important thing people need to do when budgeting with a credit card is stick to your budget. See a credit card like any other non-credit finance like cash or debt card. The advantage is that you don’t actually lose the money until the end of the month, meaning your getting more interest, but, other than this, it should be seen exactly the same as any other source of money.

Write to Julie Williams at julie@creditdonkey.com

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