Promoting the use of credit cards maybe be controversial opinion when it comes to budgeting, but hear me out. In my own financial journey I’ve found value in using credit cards over debit cards, not because of the air miles or whatever points earning programs credit card companies often use to entice people into spending on credit cards, nor is it in building up my credit score, but rather I discovered that spending on credit card gave me that buffer that I sometimes needed between spending and paying.
Invariably unexpected expenses come along, and we sometimes fail to stick to our budgets. Budgeting on a credit card means that if we go over budget, for whatever reason, then the repercussions of going over budget only takes effect 1 – 2 months in the future, so we have some breathing room to determine what we will do and we don’t have to scramble and stress out about it.
Let me give an example.
My wife and I do all our shopping – groceries, household stuff, fuel, everything ad hoc things we need to buy – on credit card. We have a monthly budget for that credit. Now if we go over budget for whatever reason, if we we we’re spending on debit card, we would go into overdraft and start paying overdraft fees immediately and would be stressing out about being in overdraft. However, because we’ve spent on credit card, that over-budget credit card statement will only be due to be paid in a month or two, giving us time to work out how to cover the excess spending. Maybe one of us needs to pick up extra shifts at work to increase our income next month, maybe we can draw some money from savings, or perhaps borrow from a friend or family. Whatever the case at least we have the time and space to think through our options and plan our response with a level head, without stressing out.
By using Spenditures, I’ve gained important visibility of my credit card spending in context of when the credit card transactions are due to be paid in 1-2 months in the future.
So now I can forecast and plan my finances to the point where I know with a high degree of certainty what my bank balance will be in 2 months time and I can project what it will look like if I stick to my budget going forwards beyond that.
And I can keep track of my family’s spending to our budget and see it appearing on our monthly budget in the month which the credit card transaction is due to be paid.
In effect Spenditures allows me to use my credit card like a future debit card, where I have complete visibility over the affect my spending now has on my bank real, live balance in the future. I love it.
Anyways, until next time. Hope you have a great day.