How to fight credit card budget woes
It turns out that less than a third of Americans keep a detailed budget, according to Gallup.
Gallup also found last year that if you went to college or have a household income of at least $75,000, you’re a little more likely to keep a budget — a little under two-fifths in those categories said they kept a budget.
So, what is our hang-up about budgeting? Gallup surmises that Americans might not feel the need to budget because they can check their bank account balance at any time via mobile banking, as well as online banking, the most popular mode of banking, according to American Bankers Association. But, budgeting is about more than reviewing your checking account regularly.
If you keep a detailed budget, you can plan for big expenses, such as visiting Aunt Mae over the holidays. Perhaps more important, you can plan for the unexpected, such as the $3,000 in car repairs my husband incurred when he recently went in for “routine maintenance.”
Because I set aside part of my take-home pay for unexpected bills, we have not suffered from any recent, unplanned expenses.
While I have my family on a strict financial diet, there is one thing I struggle with when it comes to keeping a realistic budget — budgeting for credit card bills. I’ve wondered if credit cards are actually a major reason why people do not budget adequately. Do we hide our heads in the sand because we are going over budget every month with our credit cards?
My husband and I pay our card bills off every month, a habit I highly recommend, but I still always struggle with keeping the credit card part of the budget under control. And I have put off itemizing my cards by category on my budget spreadsheet, because I know the news won’t be good. Head in sand, you say? But some people actually use credit cards as a budgeting tool.
Hank Coleman writes on DailyFinance.com that he and his wife have found that charging expenses primarily on a credit card has simplified their budgeting, because there is a paper trail. Coleman suggests that you use a charge card if you are concerned that you’ll go over budget with a traditional credit card — with a traditional card, you can simply pay a minimum payment each month. A charge card requires you to pay in full each month.
But what if you already have credit card debt?
Louise Balle advises on TheNest.com that if you owe on your cards, pay off the card with the highest interest rate first. She suggests that you make up a budget of all your expenses, including your minimum payments on your cards, then subtract that figure from your take-home pay. That sum is what should go toward your credit cards until you pay them off, she says.
Benjamin Chambers writes on Money.StackExchange.com that you can get your bank to send you a text when you reach a certain balance threshold. He actually uses his card for groceries, paying off the bill each month. Benjamin says personal finance is about behavior, rather than knowledge, and if you practice, you can learn to manage the credit card aspect of your budget, and it will become as natural as using cash.
I like the idea of getting alerts on my phone if I go over a certain amount, but the alerts allowed on my favorite card, which is with Bank of America, don’t include that option. I looked at my Capital One, and it does have an option to alert you if your balance goes above a certain amount.
I set up an alert with Capital One; I want to see if I can curb my card spending this way. It will be interesting to see if I can change my behavior, as Benjamin says you can.