Many people have learned how to utilize their credit card as a budgeting tool. Once you learn how to effectively use credit cards to your advantage while avoiding high interest costs you have won the game. Below I will describe the simple steps to make this happen and for you to be rewarded for not only sticking to a budget but also by getting cash rewards.
To start out you need to understand what you are working with in regard to your income. You need to figure out the past few month’s income and average it. Write this number down on a piece of paper and this is your earnings.
Now you want to figure out your total expenses for the month. This will include any monthly bills, food or restaurant charges, gasoline for your vehicle and any other miscellaneous charges that you are making throughout the month.
Once you subtract the two this will give you an idea of how much to set for your budget. You will want the extra for budgeting in your savings for unexpected repairs or needs. After reviewing the actual spending you have done over the last few months you will now have a good idea of your normal expenses.
The next step is to get a good cash back or rewards credit card. If you are interested in building up airline miles this is great, but I normally go for the cash back cards or double points that can be used at specific places where you shop. This can give you a big bang for your buck.
The great thing about having a cash back credit card is that virtually everything you are spending on you are building cash back points. Take your monthly bills and set them up to be paid by your credit card each month. This will automate the process of paying bills and you will be earning a large number of points or dollars. Now don’t ever exceed the budget based on your actual history. This will defeat the purpose of setting up a budget and sticking to it. The main point is to utilize your credit cards for everything you are spending money on.
I use my Bank of America Visa Signature® WorldPoints™ Rewards for all my transactions and just received a cash back check for $500. This really came in handy when my wife’s card needed the tires replaced. The points can add up quickly and at the same time you can go online and look at your account spending habits to see exactly how you are following and tracking to the budget you have set and making small adjustments to maintain that budget. At the end of the month all you have to do at this point is to write one check paying off the entire credit card.