Ask most anyone who is creating a budget to list the categories they intend to use, and they’re almost certain to include one category that shouldn’t be on the list.
That category could contain anywhere from hundreds to thousands of dollars, too.
So what is it?
Well, it might look like one of these:
Visa $350
Mastercard $225
American Express $980
Discover $465
MyFavoriteStoreCard $200
That’s right. Your credit cards are the one thing to drop from your budget like a hot potato.
Now I’m not saying you shouldn’t use credit cards to pay for things, although I would of course encourage you to get out of debt and stay out of debt if you’re using credit cards and carrying a balance.
What I am saying is that “credit cards” are not a budget category. That’s like having “hundred dollar bills” or “checks” as a budget category.
Credit cards are a method of payment, not something you’re buying. It’s the things you’re using the cards to buy that should go in your budget.
The exception to this, of course, would be if you’re no longer using the credit cards at all. If you’re just paying down debt and not charging anything additional at all, then it would make sense to have credit cards (or probably more accurately: debt repayment) as a budget category.
Dropping the “credit card” category from your budget allows you to plan ahead for the things you want and need. It also makes you think and pay a little bit attention more, which is a good thing.
And when it comes to your money, generally the more attention you pay to what you’re doing, the better off you are.
Posted in Budgeting, Debt on 11.09.10 with 4 comments.
I never thought of looking at it this way. I might give it a try for my December budget. Maybe marking those items that I paid for via credit card with some symbol or color. Might put some stuff into perspective.
Yeah it will definitely help you focus on what you’re buying.
Dropping “debt repayment” from the budget is a good idea too (meaning to get rid of it fast). I will be so excited when my $500 line item for credit card repayment is dispersed somewhere else (like in my pocket).
Oh yes, it sounds much more fun to change “debt repayment” to “pocket money” or practically anything else!