Credit Card with Flotation Device

What goes on your credit cards?

Most people who live beyond their means don’t even realize they are doing that. It happens because they start out utilizing available credit card balances and figure that they can pay the minimum payment on the credit card without a problem. Credit Card with Flotation DeviceThings put on the credit card might include groceries, going out to eat or even paying the reoccurring utility or cable bill. But, when only the minimum payments are being made, all of the things purchased that month grow beyond the monthly budget.

(dis)Organization

When I ask people how they organize their monthly bill paying, I get various answers as to how they do it. Some of the answers I have heard are:

  • Autopay is set up with most payees and payment comes out on the due date if the money is in the checking account.
  • My bills sit it in a pile until the due date or approximate due date and then I pay them when there is money.
  • As I get paid, I save out money for gas and groceries and pay the difference in bills based most important bills first (house or car).

Time to pay the piper

When someone is living beyond their means, things come to a head once the credit cards are maxed out and they have to continue paying on the credit cards which are now at capacity. At this point, things usually get uncomfortable because they aren’t able to pay the debt which has been created. Once the credit cards are maxed, there isn’t a way to continue paying all the monthly bills while still purchasing the other items on credit. Most people who get to this point either end up consolidating debt into their home with a consolidation loan, if they have equity, or they file for bankruptcy.

Solution Time: Let’s Set a Budget

Step 1: Get real with every bill you pay! List it in order of due date and keep track of when you pay each bill each month with an “x” in the box for the month.

Monthly Bills Checklist

Step 2: Evaluate the system of how you get paid: weekly, bi-weekly or monthly. Highlight your pay dates on a calendar and figure out which days of the week you will pay which bills. A couple of hours of organization can allow you to sleep at night.

Step 3: Set up two checking accounts, a bill account and another account for items like groceries, gas and entertainment. Only use the bill account for the reoccurring monthly bills. Make sure you put the correct amount from each paycheck in so this account will never be short for the main bills.

Step 4: Get a gas card and gas reward card where you do the majority of your fill-ups. When you are paid, load the amount you know you will need in gas for the current week and even the following week if you are paid bi-weekly. Many of the gas loyalty programs will give you bonus points for loading $100 or more at a time, which will get you free gas quicker.

Step 5: Get a credit union mobile banking app to watch your checking account spending. With the second checking account which is only available for your groceries, out to eat and entertainment, monitor what you have purchased daily. This will help you to see where all the extra money is going. This should motivate you to change spending habits to stay within your means.

I challenge you to start getting out from under the credit card crunch. If all you do is create and fill out a form like the one I suggest in Step 1, you will have taken a huge step to realistically seeing what your recurring bills equal. If you make it all the way through Step 5, you will be well on your way to living within your means with all the positive results that will bring!

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