Budgeting with Personal Credit Cards

Most people do not concern themselves with taking the time to create a detailed budget for their family’s finances. If the family has credit cards however, it is extremely important that a budget is set up in order to keep from falling into the typical credit card trap that so many people find themselves in- more debt than they can afford to pay back. Credit cards are the perfect solution to purchasing items on the internet, not carrying cash while traveling, and for having immediate access to funds in the event of an emergency- but they can easily be abused. If you find yourself buying things at the store that you don’t necessarily need, that you don’t have cash to buy, and saying “I’ll just pay this off when the bill comes”, chances are you are abusing your credit cards. How often do you actually pay that bill off in full when it comes each month? The trick is to create a detailed personal budget that outlines the “rules” for using your credit cards. They’re not meant to buy you items that you don’t have the money to buy right now- at least not on a regular basis. When the credit card starts getting swiped at every gas pump, grocery store and Walmart like it was your personal bank debit card, you are going to get yourself into serious financial hardships.

Personal Budgeting: How?

Your first task in creating a personal budget is to sit down and figure out exactly how much income you have each month , and what your current expenses are. This will show you the amount of money you have each month that is not already accounted for in bills you must pay. If you already use a credit card, or maybe even a few cards, look at your statements to find out what you are paying in interest on the balance. If the rate is high, look into getting a credit card with a 0% balance transfer offer, so you can move your debt from the higher interest card(s) to the new, no interest credit card. This will allow you to pay off the debt faster since the money will be going towards what you owe rather than towards interest to the credit card provider. If you are unable to find a 0% balance transfer credit card that you qualify for, consider taking out a low interest, personal loan to completely pay off your existing credit cards, or refinancing your mortgage to combine all of your bills into the single, monthly payment. This will help you pay your debt faster, and avoid paying high interest on credit cards.

Not Spending More Than You Have

If you are determined to have a credit card in your wallet, the first thing you must understand when personal budgeting is to never spend more money than you can really afford to pay! This is very difficult for people who are used to using credit cards. We get into the habit of getting the item now with the credit card, intending to pay for it later. We do it so often that when “later” comes, we are unable to completely pay for the item and we have to carry a balance from one month to the next, resulting in interest accumulation that just adds to the debt. Use credit cards sparingly. When you have determined how much money you have each month after you pay your current expenses, that amount should be the ideal amount you allow yourself to spend on a credit card. Chances are, you won’t be able to use the entire amount to pay off your bill, but you would be able to pay that credit card purchase off within two months if you didn’t add any other purchases. Spending and paying off within a month or two of making the purchase is going to build your credit history and enable to you to obtain financing for homes, or cars or other large purchases in the future. Eventually, with careful budgeting, you may never need to carry a balance from one month to the next on credit cards- and you’d be amazed how much money this is going to save you in the long run!