Budgeting for the Credit Card User

So let us say you are the type who wants to take control of your finances but no matter how many budgets you created, spending plans architected or purchases tracked you are unable to get control. Well here is a simple way to make a budget that you will follow from day one through day 365. Since you use a credit card all your purchases are tracked, now how many credit cards do you have 1? 3? 25? 486? Each card usually will send you an end of the year summary of all your purchases. Go find those summaries. Now they break down your purchases into categories add up the amount from each category from each statement. Got the total for each category? Good now divide the total by 12, that is how much you spend on average each month to the category and thus your monthly budget. Congrats, you have a budget you can follow since you already have been following it!

Now go get your paystub and look at the NET pay. Add up the total for each category, is it more or less than your net pay? If it is more then you need to earn more (side hobby, moonlighting, selling matchsticks, etc.) if it is less than congrats you have a surplus (assuming that you paid solely with a credit card) that you can put towards emergency savings, retirement, pay down debt, etc.

Now that you have this information set up a bunch of savings accounts for each category with auto transfers on the day after your paycheck is deposited for the monthly amount (or if you are paid twice a month, half the monthly amount, or if you are paid weekly, a 52ed of the yearly amount). Personally I will add a little buffer if I can afford it so that I end of saving for an unexpected expenses in each category. Now that you have your accounts set up and you are saving money to pay the expenses, before the bill is due go through each item and total up each category for the month to transfer into you checking account to pay the bill. Remember if are carrying a balance this will just pay off what you purchased that month so pay as much as you can towards paying off the balance of card (but not with funds from the category accounts), eventually you will be paying the balance in full each month.

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