If you have started using credit card (s), you need to create a budget for your spending. By doing so, you can make sure that that your monthly expenditure remains under control. This is, in fact, a multi-step process. First and foremost, you need to assess how much is your monthly expenditure. Thereafter, you need to put a spending limit for each category of expense. Then you decide on your monthly credit card goals.
It is also important to set your credit card on auto payment mode so that you don't pay a high amount on interest rate. Eventually, you are also expected to review your expenses from time to time to keep a check on unnecessary and avoidable expenses.
1. Evaluate your monthly income and expenses: First of all, you need to calculate your total monthly income after taxes. Then you can make an entire list all your fixed expenses (such as rent, utilities, insurance). Then you need to estimate monthly costs for food, entertainment, transportation. Include any minimum payments for loans or existing credit card debt.
2. Set a limit of spending for each category: It is vital to review your spending habits and set reasonable limits for categories where you tend to use your credit card.
However, you need to make sure that you are setting aside enough for essential expenses and savings before planning discretionary spending.
3. Monthly credit card goals: Set a target for total monthly credit card spending based on the amount you can afford to pay off in full by the due date. If you are focusing on earning points or cash back.
You need to aim to maximise spending in categories that earn the highest rewards such as groceries or travel but only within budget limits.
4. Track spending weekly: You should keep an eye on your credit card charges each week to ensure you’re staying within your set limits. Many card issuers have tools to help you categorise and track spending. You should adjust spending limits if you find that certain categories need more flexibility or if you discover ways to cut costs.
5. Automate payments to keep interest element low: You need to set up automatic payments for at least the minimum due, or ideally the full balance, to avoid late fees and interest.
You should avoid carrying a balance if possible, as interest can quickly offset any rewards you earn.
6. Review it regularly: At the end of each month, you are supposed to review your spending and examine see how it compares to your budget. Adjust your spending limits if you need more in certain categories or if you’re ready to increase your savings or investment contributions.
