This may sound silly, but once a week I hide my credit card away for a full 24-hours. This simply means that I cannot spend anything on my card that day.
This does not stop me buy things that I really need as I can obviously get them the following day; but “silly” things that I would sometimes buy become irrelevant when I can’t buy them.
Give it a try and just don’t spend anything on your card for a full 24 hours. It’s best if you physically hide your card somewhere. It’s actually really easy to do and the rewards may seem small but in the long run every small bit adds up. Not only the physical money but also the mental observance of what is really important and what is not.
Managing your credit card spend and keeping it within your monthly budget can be a bit tricky. The reason is that we budget for a calendar month, but our credit card statement generally happens at a random mid-month date. My credit card statement cycle is from the 8th of each month to the 8th of the next, but my payment must always be made by the 3rd. Now that’s just confusing!
It would make so much more sense if the statement cycle just ran over a normal month so that we could easily track our spending. But this way, the banks keep us confused and we just keep spending money never really being in control.
Let’s take a closer look at the issue and I’ll show you how to stay in control with just a very simple calculation. It will just take a few minutes of admin and a weekly checkup on your statement to make sure you know what’s happening.
Step 1:
Make sure that you can easily access your statement whenever you want. You can probably do this online, via an app or possibly even some texting service. However you do it, be sure that you’re set up as you will want to check your balance weekly.
Step 2:
Set a few reminders on your phone
1st of every month – check your balance
Set up a monthly reminder to pay your card balance on the same date each month
Set reminders for the 7th, 14th, 21st and 28th to just check-up on your balance (it will soon become a natural habit to do this, but reminders will help in the beginning)
Step 3:
Create a spreadsheet similar to this. My calculations assume that I make a payment near the end of each month, so you must just take into account when you make a payment.
Zoom in if you can’t read the notes
You need to know what the starting balance on your account is. This is how much money you can spend. Then, enter the amount that you budgeted for your credit card spend.
The payment due amount will only be known later in the month, and the real final balance obviously only at the end of the month.
Because my monthly payment happens near the end of the month, my weekly check-points are simply the opening balance less a quarter of my budgeted spending. These figures are just rough estimates to what my account balance should be and if there is a major discrepancy I can always look at the transaction details.
The Predicted Month end balance is the Starting Balance less spending plus the payment made into the account.
All it takes to track your spending is a weekly check-up of your balance to see that you are on track.
Don’t let the banks mid-month statements confuse you, take charge of your money!
As with your simple budget, there is no generic solution to understanding how you spend your money. We all have different spending habits and ways that we understand our money.
Something I find useful though is to know how much money is spent via automatic payments from my account, how much money I spend as Cash, and how much on my Credit Card. You of course may have multiple credit cards or store cards and if that’s the case it will be very difficult (if not impossible) to budget spending per card. If you have multiple cards then you really need to ask yourself whether you need them all, and if not, start cancelling them. One tip I can give with absolute confidence is that if you want to be in control of your money, you need to keep things simple!
In this example I have simply indicated which categories are paid via Automated Electronic payment, by Cash & by my single Credit Card. In reality, your spending will never be exact, and unplanned things happen. That is fine, as long as you know what your plan is, and can identify where and why things have changed.
The advantage with categorizing spending by type is that you can actually draw the cash you need for the month upfront and you can also keep track of your credit card expenses as you know what is budgeted for your card. When doing this exercise though, have a look at the advantages of using cash and consider using cash for more of your spending.
This is just another way to understand what you are spending money on, and how. Take this concept and make it work for you with your specific circumstances.
