A credit card can create major financial problems for someone who uses it without having a proper plan. For many people out there, the answer to avoiding any of the drawbacks of credit is easy – consolidation of debt. They should consolidate debt at a lower rate of interest by making use of a personal loan or a balance transfer credit card, make a plan to pay off all the outstanding dues as soon as possible and then stop the usage of credit altogether. For people who fear that they will be tempted to spend on their cards, it might be smart and much needed to resort to cutting their cards or freezing them.
But not everyone out there needs to avoid this plastic or take drastic steps to move these cards out of their sight. It is possible for you to enjoy rewards and consumer protection without being under a pile of debt or by ruining the financial goals you have planned. You just need a proper plan and some discipline in your way of spending and paying your bills. If you are excited to make the most out of your credit card in 2020, here are some tips you can follow.
Start With a Monthly Budget
Preparing and using a monthly budget is a really smart idea, regardless of your payment method is via credit or not. A budget is essential, especially if you are concerned about a credit card debt. Bear in mind that a budget is nothing more than a mere plan for managing the funds that you have worked really hard to earn. It is necessary for you to budget for the compulsory expenses and payments of your bills, but that does not mean that you cannot leave some flexibility in your budget for some fun activities.
Budgeting can be done in many ways. One simple way is to budget using the pen and paper. All you have to do is create a list of all of your monthly expenses on one side of the paper. You will have to include the basic predictable expenses such as car payment, mortgages, insurance costs, etc. but you also have to include anticipated expenditures in categories that are likely to fluctuate such as utility bills, groceries, entertainment, among others.
Make sure to budget for your savings, and also for your debt repayment if you are holding existing debt. To get a step closer to your financial goals, it is important for you to budget money towards your savings and treat them as a priority. The opposite approach that involves saving whatever amount is after accommodating your expenses does not work well.
In another column of the paper, you should start listing the amount of income that you aim at bringing home every month.
Also, if you are not the type to write a monthly budget, there are numerous online budgeting apps available on your mobile’s store, you can download them, and keep an account for the same categories mentioned above.
Set Spending Limits for Different Categories
The key to budget better with your credit card this year is to make sure that the spending incurred by you is in complete control and well under the limit set by you. While creating your monthly budget, it is good to reconsider and ask yourself if you are spending way more than required in certain spending categories, and whether the spending in those categories can be controlled by you.
For instance, many families tend to spend more than they actually need to on dining out or buying groceries, here they could save up some money every month by easily cooking at home more often or buying groceries strategically. It is possible that you find yourself to be spending more than you need to on entertainment once you go through your bills for the month.
Either which way, it is best to set reasonable limits for each and every category that you spend money in every month. In this, you have a set framework to lean on as you manage in the best manner to stick to your budget plans and reach the goals you have set for your savings.
Only Opt for Credit For Your Planned Purchases
With a proper budget set and a proper spending plan at hand, you will want to your best credit card for all of your planned expenditures throughout the month. Not only is making use of the plastic money is convenient, but it also makes it really easy to track and review where you have spent money in the entire month by simply logging into your account online at any time and anywhere.
The key to making the best out of your plastic money in 2020 is to make sure that you are only using a credit card for regular expenditures and planned purchases. If you wish to buy something that is not a part of your planned budget and is not even an emergency, you should plan ahead and put it in your budget for the upcoming month.
The biggest exception here, however, remains the miscellaneous expenditures, which are very crucial to accommodate in your planning. What we are talking about here is not buying an impromptu dress for your office gettogether. Instead, it is about the sudden expenses that life may bring your way that tend to catch you with shock.
It could be the birthday party that slipped your mind completely and you did not buy the gift you need, maybe the last minute trip to your dentist, or maybe that oil change your prized possession really is calling for, these can easily throw your budget off the right track if you do not make enough room for necessary spending that is unplanned and might be thrown your way. This is why you should aim at dedicating a column to the “miscellaneous spending” in your budget every month. If you do not come across any surprise expenditures in the month, you can always dedicate these excess funds to your savings or move it as extra funds for the upcoming month’s budget.
Track Your Monthly Spending
It is also equally important to track and constantly check-in on your expenses throughout the month, which has been made easier since you can simply log into your credit card account to see all the transactions of your credit card. After logging in, you should take your time to tally the spending in the various spending categories such as fuel, entertainment, dining, bills, etc. throughout the month so that you can keep a track when you are getting close to the limit you have set.
Once you have reached the limits that you have set for the specific spending categories, you have to anyhow stop spending. This can be tough if you spend the entire budget you have set for groceries by, say 20th of the month, but still you require milk and bread and other essentials. The ultimate goal is learning how to budget in the best manner and making your money work for you by stretching it over longer periods. You need to ultimately discipline yourself to stick to your budget in the most cost-effective manner that will help your essential funds last until the end of the month.
Pay Off Your Dues Several Times a Month
This is another important tip to keep in mind – log into your credit card account and pay off your outstanding dues down to zero numerous times a month. Taking time out to pay your outstanding bills off will help you in keeping out of debt in the long term, but it will also help you in realizing the pain involved in spending your hard earned money and watch it disappear from your bank.
Also, keep in mind, a part of the reason why using the credit is risky is the fact that one can purchase anything all month long without having to worry about it at all until the bill arrives at the doorstep. By being proactive and managing to clear your outstanding bills numerous times a month or even aiming at doing so once a week, will force you to face reality regarding your spending and part with your funds for the entire month.
Get Your Partner on Board
Getting an improved budget in 2020 also needs your partner or your spouse to be in the same boat as you. Obviously, it will actually help quite a bit to know that your partner is excited about your written budget or online budget plan, and they are also willing to track their expenditures and manage to stick to the limit that you guys have set together after working hard.
Luckily, you can get your partner on board as the same spending plan as yours by adding them as a user on your card or making them sign up for a new one. Some of the best rewards and travel cards allow you to combine your points in one account in the end so that you can afford even the expensive redemptions.
Do Not Carry a Balance
Finally, the last but not the least, and the most obvious tip. If you want to budget in 2020 with a credit card and actually end up winding it up beforehand, you should never, and I mean NEVER carry a balance forward on your credit card. Credit cards can end up causing quite a lot of financial harm (especially in the short term) with their high-interest rates.
The best ways to use your card without carrying forward any balance are the steps that have been outlined above. For instance, you should only make use of a credit for planned purchases, and pay off your balances many times a month. Creating a budget for the month, whether it is written on a paper, or made on a mobile app, can go a long way when it comes to helping you realize the perks of credit without having any piled up debt.
But, do not beat yourself up if you find none of the above tips to work for you. The reality is that for whatsoever reason, some people face a difficult scenario when it comes to using credit without facing any debt.
If you do not think that you can stick to a budget or pay your bills several times a month, or even once in full every month, or if you have tried multiple times and still failed, it is best you consider the option of skipping credit and budget using a debit card or cash instead.