Michael is an avid content writer and researcher on various topical subjects related to personal finance and development.
Budgeting as a Lifestyle
With so many avenues available nowadays to obtain quick credit, it is easily possible to lose vigilance over one's personal finances and allow credit card debt to spiral out of control. Every day, numerous offers for personal loans, new credit cards, debt consolidation loans and other forms of credit are broadcasted via all channels, from email and television to the store you frequent where they now have their own store card.
The plethora of purchasing and spending options makes budgeting for many people difficult, since there are so many things to try and keep track of. In order to gain control over one's debt situation, household budgeting is essential. The objective of budgeting is to ensure that there is a proper balance between income and expenditure. And you do not have to be a miserable miser to do this.
Budgeting achieves this by enabling you to keep track of your expenses. Credit cards provide you with different payment options to choose from, depending on what is most convenient for you.
Keep the Purpose in Mind
When it comes to credit cards, failure to define a clear and strict budget for expenses and to follow it carefully, will lead you into the same pit that countless others worldwide have fallen into and that is serious financial debt. The first step in the right direction is to understand the correct purpose of a credit card.
The primary purpose of a credit card is for emergencies or when travelling, so that you do not suddenly find yourself out of pocket when you need to spend for your daily needs. The challenge is that a lot of people begin with this premise when they first start using credit cards. But then later, the credit card begins to be viewed as a personal ATM for every conceivable purchase, irrespective of the urgency or importance.
Use Direct Debit Payments
It is possible for you to set up a direct debit payment arrangement between your bank and the credit card company such that a fixed amount from your earnings goes directly to the latter each month. This could be the minimum amount, the full amount or a figure in between that is most convenient for you.
Setting up the direct debit is a first step, but there is still more to be done, because if your monthly expenditure is higher, then you will still be accumulating more credit which will have to be repaid at some point in the future.
Configure Account Alerts
A lot of banks allow you to set up account alerts. For example, if you reach 20% of your credit limit, you may receive a warning through a text message or an email alert. Some financial institutions also require you to receive regular reports, which are not dependent on how much your balance is. Whichever method, receiving regular account reminders and updates means you will be more likely to have a clear picture of how much you spend.
Set a Spending Limit
If you have a credit card in your possession, the way to live within your means and not spend more than you can afford is to bear in mind that you are spending money from your own future today and you will be charged extra for that "privilege". It is therefore unwise to use the credit card when shopping as you would with other forms of payments like cash and your debit card, which are means of spending money from your present situation, i.e. that you presently have.
Only allow yourself to charge as much as you are able to pay in full during a specific billing period to remain on the budget. Set a monthly spending limit or threshold to keep the credit card manageable. For instance, if you have your expenses at a minimum of $900, keep the balance for your monthly credit card under that amount. To flexible budgeters who think more about the necessities than the individuals. This is perfect for versatile budgeters.
Track Your Expenses
Make a list of all your outgoing expenses for each month. Include incidentals and irregular occurrences like car maintenance and oil changes. Ensure you include your personal monthly savings as a personal expense. If you are saving toward something, then you need to include it in your budget as a personal expense.
The flexible spending amount is what is left over after you have deducted all the expenses you have listed from your monthly income. This is your ceiling. So whether you have a credit card or not, you should never spend or make purchases beyond the figure of this flexible amount. If you maintain this as your goal, it will keep you from falling into a huge financial meltdown.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.
© 2019 Michael Duncan