How do you manage credit card use with monthly budget

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schutzk21
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How do you manage credit card use with monthly budget

Post by schutzk21 » Wed Jan 09, 2019 7:39 pm

Hello everyone,

I apologize if this has been asked in the past. I just signed up with Personal Capital and I am having trouble with how to analyze monthly spending using my credit cards. My wife uses one credit card and I use a different credit card from a separate account. I like the idea of having $5k in my checking account at the end of each month. Anything over this amount at the end of the month I would transfer to my Roth IRA or savings.

I am having trouble determining how much money I truly have at the end of each month. I may have $5500 at the end of the month in my checking, but owe $400 on one credit card and $300 on the other credit card the first week into the next month.

Am I overthinking this? What would be the best plan for this? Is there something simple I am missing?

Thanks for your help!

sport
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Re: How do you manage credit card use with monthly budget

Post by sport » Wed Jan 09, 2019 7:43 pm

You could use the balance on your cards at the end of the month for your calculation.

onourway
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Re: How do you manage credit card use with monthly budget

Post by onourway » Wed Jan 09, 2019 7:59 pm

I don’t find PC to be terribly useful for this kind of tracking. I much prefer You Need a Budget which will make tracking this automatic.

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Phineas J. Whoopee
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Re: How do you manage credit card use with monthly budget

Post by Phineas J. Whoopee » Wed Jan 09, 2019 8:33 pm

My credit card use is subsumed within my overall spending plan. Whatever I spend, whether in physical cash, or by check (although that's very seldom), or by debit card (although I never do that if I can avoid it, but a new laundry contractor in the building has forced things a little), or by credit card all comes out of the same pool of money. The form makes no difference, no more than it would if I spent ten $1 bills rather than one $10 bill.

It's as if there were a physical envelope with Federal Reserve Notes in it, except I'm indifferent (but for a cash-back credit card feature) about how I pay. It all works out the same.

I recognize a couple will need to coordinate more, but, as some unnamed sage once said, fish is fish.

In terms of computers telling me, I have used the now-discontinued Microsoft Money for over a quarter century (and therefore am reluctant to give it up because much of the documentation I have about my own personal history lives there), and created a report called Net Operating Funds. It adds up checking and my savings account I keep right next to it for immediate liquidity purposes, less credit card debt. That's the bottom line number (with respect to, well, net operating funds).

Should I have an out-of-ordinary-budget expense I need to put on plastic I move reserves from another account to cover it.

Does that help?

PJW

fujiters
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Re: How do you manage credit card use with monthly budget

Post by fujiters » Wed Jan 09, 2019 11:50 pm

You may want to try using Mint.
“The purpose of the margin of safety is to render the forecast unnecessary.” -Benjamin Graham

olliema
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Re: How do you manage credit card use with monthly budget

Post by olliema » Thu Jan 10, 2019 12:16 am

If you are dealing with a 5000 buffer, why not just pay your card in full every 5-7 days? You could reduce your hypothetical $700 credit card bill at end of month to a fraction without doing anything different.

If what you are really trying to manage is overall cash flow, my system is below:

Before month x starts, forecast known expenses and income for that month in your tool of choice (paper, xls, budgeting software)
The categories you use are not important as long as you can forecast them in a meaningful way that you can reconcile as expenses come in.
Each day, take 10 minutes to log your actuals in whatever too you use (paper, xls, budgeting software), and you will know your exact cash position relative to forecast.
Each Sunday, review your forecast for remainder of month and adjust where needed to stay on track, and pay the credit cards in full.

MotoTrojan
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Re: How do you manage credit card use with monthly budget

Post by MotoTrojan » Thu Jan 10, 2019 12:41 am

I use Mint and also an Excel sheet projecting my cash balance for the next 12 months (recurring or one-off income/expenses).

Tdubs
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Re: How do you manage credit card use with monthly budget

Post by Tdubs » Thu Jan 10, 2019 12:45 am

I also use mint. It is free and tracks my accounts well.

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Hyperborea
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Re: How do you manage credit card use with monthly budget

Post by Hyperborea » Thu Jan 10, 2019 1:25 am

It really doesn't matter when the credit card payment is accounted for as long you account for it. Why not just account for the payment in the month that you pay the credit card bill. So, if you pay for December's credit card expenses with a transfer in January then that is the month you account for it. It will be the same in the long run after you switch over to it.
It’s hard to win an argument with a smart person, it's damn near impossible to win an argument with a stupid person. - Bill Murray

MotoTrojan
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Re: How do you manage credit card use with monthly budget

Post by MotoTrojan » Thu Jan 10, 2019 1:29 am

Hyperborea wrote:
Thu Jan 10, 2019 1:25 am
It really doesn't matter when the credit card payment is accounted for as long you account for it. Why not just account for the payment in the month that you pay the credit card bill. So, if you pay for December's credit card expenses with a transfer in January then that is the month you account for it. It will be the same in the long run after you switch over to it.
It may be easier/safer to use Mint or similar to track the month of spend, and not the month of payment, so there is time to adjust your budget to make up for an above average month.

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celia
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Re: How do you manage credit card use with monthly budget

Post by celia » Thu Jan 10, 2019 1:31 am

schutzk21 wrote:
Wed Jan 09, 2019 7:39 pm
I just signed up with Personal Capital and I am having trouble with how to analyze monthly spending using my credit cards. My wife uses one credit card and I use a different credit card from a separate account. I like the idea of having $5k in my checking account at the end of each month. Anything over this amount at the end of the month I would transfer to my Roth IRA or savings.

I am having trouble determining how much money I truly have at the end of each month. I may have $5500 at the end of the month in my checking, but owe $400 on one credit card and $300 on the other credit card the first week into the next month.

Am I overthinking this? What would be the best plan for this? Is there something simple I am missing?
Here are the various options I see:
1. Redefine "month" for budget purposes to be the 8th of the month until the 7th of the following month. That will get the two credit card payments into the "month" you want (if I understand you correctly).
or

2. Call the credit card companies and ask them to change the closing day of the statement to be the 29th or 30th of the month. This will make May purchases through May 30 be on one statement which will have the payment be withdrawn from your account around June 30-ish. Since your check register probably reflects all the money going out in date order, the May credit card purchases probably will show up in the June column, just like the utilities you used in May. (Other budget items are pre-paid such as insurance premiums.)

3. Start a new page in the check register for each month. (You may want to look for a register that has more lines than what the banks provide. I ordered a bunch on eBay that had 16 lines on the top half of an open register and 18 lines on the bottom.) Since all my payments for each month easily fit on fewer than 34 lines and because I am "lazier" in retirement, each January I label the top half of adjoining pages (ie, the top page with 16 lines) for a different month of the year. Then I list our sources of income at the top of each month followed by the names of known expenses we will have. I leave the amounts for later unless it is a known fixed expense. As the bills come in, I enter the amount to be paid. Then when the checking statement comes in, I check each item off in the check register and the statement where they agree. Then I am only left with a few adjustments to make, such as a credit card withdrawing less than expected (since I returned something to the store since the credit card statement was printed).

4. You could designate different credit cards for various budget items. For example, food is often purchased many times throughout the month, so, to watch your food budget allowance, you could use one credit card just for food. We each have a separate credit card for family/joint expenses, one for medical expenses, and one for personal expenses (since we each get a separate amount of money each month to spend how we wish). This may necessitate getting a few more cards with new account numbers. But it may be worth it to help in budget tracking. You don't have to go crazy over this but separating out your one or two budget categories that have the most activity would be ideal for separate cards.

benevo
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Re: How do you manage credit card use with monthly budget

Post by benevo » Thu Jan 10, 2019 3:15 pm

onourway wrote:
Wed Jan 09, 2019 7:59 pm
I don’t find PC to be terribly useful for this kind of tracking. I much prefer You Need a Budget which will make tracking this automatic.
+1

YNAB is a game changer, IMO.

SmallSaver
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Re: How do you manage credit card use with monthly budget

Post by SmallSaver » Thu Jan 10, 2019 3:22 pm

+2 for YNAB.

Basically, the trick is that when you buy something with a credit card you immediately take the money out of your budget and stash it in an envelope which you will then use to pay the cc bill.

I was never able to keep track of credit cards, work reimbursements, non-monthly recurring payments, etc...until I started using YNAB. A bit of a learning curve, but everything just about runs itself now.

UpperNwGuy
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Re: How do you manage credit card use with monthly budget

Post by UpperNwGuy » Thu Jan 10, 2019 3:28 pm

schutzk21 wrote:
Wed Jan 09, 2019 7:39 pm
Hello everyone,

I apologize if this has been asked in the past. I just signed up with Personal Capital and I am having trouble with how to analyze monthly spending using my credit cards. My wife uses one credit card and I use a different credit card from a separate account. I like the idea of having $5k in my checking account at the end of each month. Anything over this amount at the end of the month I would transfer to my Roth IRA or savings.

I am having trouble determining how much money I truly have at the end of each month. I may have $5500 at the end of the month in my checking, but owe $400 on one credit card and $300 on the other credit card the first week into the next month.

Am I overthinking this? What would be the best plan for this? Is there something simple I am missing?

Thanks for your help!
The answer is easy. Consider the money to be spent the moment the credit card is swiped. You can pay off the credit card balance later the same month or early the following month, but the money to make the payment should be set aside in the month of the expenditure. I use Moneydance to track my spending and to compare it to my budget. At the end of each month, the sum of my primary checking account and my credit card balances is always a positive number. Paying off the credit card should not be thought of as "spending." It's just moving money from one account (checking) to another (credit card) with no impact to your bottom line.

aristotelian
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Re: How do you manage credit card use with monthly budget

Post by aristotelian » Thu Jan 10, 2019 3:32 pm

I get weekly balance alerts from my primary card (CapOne Quicksilver 1.5% Cash Back). That gives me a heads up if we are going to have a bad month for some reason. You can have your spouse be an authorized user on your card (or vice versa) so that you are just tracking one card instead of two.

Unfortunately, whatever app or tracking system you use will not impact your actual level of spending.

Jags4186
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Re: How do you manage credit card use with monthly budget

Post by Jags4186 » Thu Jan 10, 2019 3:34 pm

schutzk21 wrote:
Wed Jan 09, 2019 7:39 pm
Hello everyone,

I apologize if this has been asked in the past. I just signed up with Personal Capital and I am having trouble with how to analyze monthly spending using my credit cards. My wife uses one credit card and I use a different credit card from a separate account. I like the idea of having $5k in my checking account at the end of each month. Anything over this amount at the end of the month I would transfer to my Roth IRA or savings.

I am having trouble determining how much money I truly have at the end of each month. I may have $5500 at the end of the month in my checking, but owe $400 on one credit card and $300 on the other credit card the first week into the next month.

Am I overthinking this? What would be the best plan for this? Is there something simple I am missing?

Thanks for your help!
Mint is a better budget tracker than Personal Capital.

Here’s what we do:

We make a yearly budget, divide by 12, and enter each category into mint with “carry over” checked. How this works in effect is we have a $6000/mo budget, but some months we spend $4000, some we may spend $10,000. It all depends on what’s going on. We pay our car insurance annually in June. It is $2400. So I put in “$200/mo” as my car insurance budget. In June when it gets paid I have $1200 “available” to spend on car insurance, and once I make the payment I am over budget on car insurance by $1200. By the time December comes around I will have accrued the remaining $1200 and that category will have been fulfilled at end of year. You’ll see your checking account balloon some months and get depleted in others, but try to aim to keep a minimum of your fixed, non revolving expenses in there. We never let our checking account fall below $3000. That’s enough to cover our mortgage payment and all of our recurring bills that do not accept credit card.

Don’t worry about whether or not you put a charge on your credit card, it shouldn’t matter. Just stick to your budget.
Last edited by Jags4186 on Thu Jan 10, 2019 3:36 pm, edited 1 time in total.

corysold
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Re: How do you manage credit card use with monthly budget

Post by corysold » Thu Jan 10, 2019 3:35 pm

We pay off our credit card the last day of the month, even though it isn't actually due until 10 days into the next month. That way, we can close out each month with enough to start the next month, similar to your buffer, we need $2500 on the first of each month to pay rent and a few other bills due then.

SubieGirl14
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Re: How do you manage credit card use with monthly budget

Post by SubieGirl14 » Thu Jan 10, 2019 4:07 pm

If you budget monthly, you can call your credit card company and change the statement closing date for both credit cards to the last day of the month. You might run into a credit card that will not change it to the last day because not all months have the same amount of days, but I have not had an issue changing it to the 1st day of the month.

nyclon
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Re: How do you manage credit card use with monthly budget

Post by nyclon » Thu Jan 10, 2019 4:10 pm

schutzk21 wrote:
Wed Jan 09, 2019 7:39 pm
Hello everyone,

I apologize if this has been asked in the past. I just signed up with Personal Capital and I am having trouble with how to analyze monthly spending using my credit cards. My wife uses one credit card and I use a different credit card from a separate account. I like the idea of having $5k in my checking account at the end of each month. Anything over this amount at the end of the month I would transfer to my Roth IRA or savings.

I am having trouble determining how much money I truly have at the end of each month. I may have $5500 at the end of the month in my checking, but owe $400 on one credit card and $300 on the other credit card the first week into the next month.

Am I overthinking this? What would be the best plan for this? Is there something simple I am missing?

Thanks for your help!
Have you tried using Debitize? It will reconcile your credit cards to cash each day by debiting your checking account.

H-Town
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Re: How do you manage credit card use with monthly budget

Post by H-Town » Thu Jan 10, 2019 4:12 pm

schutzk21 wrote:
Wed Jan 09, 2019 7:39 pm
Hello everyone,

I apologize if this has been asked in the past. I just signed up with Personal Capital and I am having trouble with how to analyze monthly spending using my credit cards. My wife uses one credit card and I use a different credit card from a separate account. I like the idea of having $5k in my checking account at the end of each month. Anything over this amount at the end of the month I would transfer to my Roth IRA or savings.

I am having trouble determining how much money I truly have at the end of each month. I may have $5500 at the end of the month in my checking, but owe $400 on one credit card and $300 on the other credit card the first week into the next month.

Am I overthinking this? What would be the best plan for this? Is there something simple I am missing?

Thanks for your help!
A back of envelope math should help:

$5,500 in checking
- $400 outstanding balance on credit card #1
- $300 outstanding balance on credit card #2
-----------
= $4,800

aristotelian
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Re: How do you manage credit card use with monthly budget

Post by aristotelian » Thu Jan 10, 2019 4:15 pm

One more thing, I "amortize" large known expenses (property tax, etc) and set a bit aside each month into a separate account. Then I pay those bills from that account. That smoothes out our cash flow, and also ensures the cash is there when the bills come due.

FlyOverState
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Re: How do you manage credit card use with monthly budget

Post by FlyOverState » Thu Jan 10, 2019 4:22 pm

+3 for YNAB
Thanks, | John | | FlyOverState

biturbo
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Re: How do you manage credit card use with monthly budget

Post by biturbo » Thu Jan 10, 2019 4:27 pm

The vast majority of our purchases are done via CC (to maximize cashback - we average over $100/month), except for a few utilities that won't take CCs, our mortgage, car payments, and random cash withdrawals to pay babysitters. Here is what we do that has worked pretty well:

1. I figure out roughly what we spend every month. Usually, our monthly spending is +/- a few hundred dollars of that target, with some exceptions (see #3). This includes CCs and other payments.

2. I end every month with that amount in checking. Left over money is allocated based on goals we have for the year, subject to some adjustment. Categories might be: Emergency fund, big purchases, kids 529, etc.

3. For bigger purchases that move us far outside that number, I have a few ways of dealing with this.

For big things that are known and relatively stable, I look at how much we'll spend on that over the year, divide it by 12 and have an automatic transfer of money to a special savings account for that purpose. Right now, the only thing that is like that is car insurance/registration.

For one-off things, it comes from cash we've set aside for bigger purchases. Things like furniture, TVs, home improvement items, vacations, etc.

On the month the cash is leaving our account (usually the month after we paid for it with a CC), I transfer the cash into checking to cover it.

I'm a software developer, but my educational background is in finance/accounting, and so there was a time I was trying to perfectly match spending up with the month it went out and transferring smaller amounts of money around to make everything feel right from an accounting perspective, but that just ended up being a lot of meaningless work and this is a fairly good compromise.

If our spending were closer to our income and there wasn't a lot of cushion every month, I might instead aim to end every month with what was going out the next month - that is a little more work, but still fairly doable.

Texanbybirth
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Re: How do you manage credit card use with monthly budget

Post by Texanbybirth » Thu Jan 10, 2019 4:47 pm

SmallSaver wrote:
Thu Jan 10, 2019 3:22 pm
+2 for YNAB.

Basically, the trick is that when you buy something with a credit card you immediately take the money out of your budget and stash it in an envelope which you will then use to pay the cc bill.

I was never able to keep track of credit cards, work reimbursements, non-monthly recurring payments, etc...until I started using YNAB. A bit of a learning curve, but everything just about runs itself now.
Interesting review of YNAB. We've used Mint for tracking household expenses since 2011. I thought YNAB required you to enter every transaction manually. Does it actually link to CCs like Mint?

I've always had issues with Mint accounting for non-monthly bills: auto and life ins premiums, etc. I've tried using the "carryover leftover balance" feature in Mint's Budgets section, but it just seems funky and inflexible. It also doesn't hit our budget each month, until the month the bill is actually paid. It's like mixed accrual-cash accounting.

The ads on Mint are also getting outrageous. I know it's free and I'm the product, but I'd happily pay a small fee to avoid them.
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Fresh Air
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Re: How do you manage credit card use with monthly budget

Post by Fresh Air » Thu Jan 10, 2019 5:08 pm

I think you're overthinking the savings part. If all you want to do is see excess - just change all your credit card due dates to be roughly the same (usually can be done online), pay them in full on the same day, then look at your checking account a day or two later once everything is processed. Then you can move the excess to your IRA/savings. The calendar months don't matter as much for this use.

The "float" is covered by your $5000 buffer anyway, if you're worried about "mental accounting" of only spending what you physically have in your checking. (Which matters very little if you have an emergency fund, and generally good savings habits). If that bothers you, just pay your full balance on the last day of the month, and move the savings away once it hits.

I use YNAB for the record, as I track every penny, and it does do this automatically as mentioned in prior posts. My comment is more for the "how much can I put into savings" question, than "how do I analyze my monthly spend" - which can be quite a bit more complex.

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Re: How do you manage credit card use with monthly budget

Post by The Wizard » Thu Jan 10, 2019 5:23 pm

I don't use budgeting or tracking software, but I try to keep UP TO $10,000 in my checking account.
I'm well under that presently due to having just made a $3500 estimated tax payment to cover an end of year Roth conversion.
But that's the sort of lumpy expense that makes me target a decent checking account balance.

For my two credit cards, I try to pay the BALANCE on each twice a month when new money hits my checking account. This way my remaining checking account balance is more accurate...
Attempted new signature...

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Re: How do you manage credit card use with monthly budget

Post by ColoRetiredGirl » Thu Jan 10, 2019 9:19 pm

onourway wrote:
Wed Jan 09, 2019 7:59 pm
I don’t find PC to be terribly useful for this kind of tracking. I much prefer You Need a Budget which will make tracking this automatic.
+++Yes! Use You Need A Budget (YNAB).

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cheese_breath
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Re: How do you manage credit card use with monthly budget

Post by cheese_breath » Thu Jan 10, 2019 10:20 pm

Mine is a simplistic method and won't work if you want to track when you committed to spend something, but I just count the credit card spending in the month I pay the bill. So it's actually a month behind, but that's OK with me.
The surest way to know the future is when it becomes the past.

SmallSaver
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Re: How do you manage credit card use with monthly budget

Post by SmallSaver » Fri Jan 11, 2019 12:00 am

Texanbybirth wrote:
Thu Jan 10, 2019 4:47 pm
SmallSaver wrote:
Thu Jan 10, 2019 3:22 pm
+2 for YNAB.

Basically, the trick is that when you buy something with a credit card you immediately take the money out of your budget and stash it in an envelope which you will then use to pay the cc bill.

I was never able to keep track of credit cards, work reimbursements, non-monthly recurring payments, etc...until I started using YNAB. A bit of a learning curve, but everything just about runs itself now.
Interesting review of YNAB. We've used Mint for tracking household expenses since 2011. I thought YNAB required you to enter every transaction manually. Does it actually link to CCs like Mint?

I've always had issues with Mint accounting for non-monthly bills: auto and life ins premiums, etc. I've tried using the "carryover leftover balance" feature in Mint's Budgets section, but it just seems funky and inflexible. It also doesn't hit our budget each month, until the month the bill is actually paid. It's like mixed accrual-cash accounting.

The ads on Mint are also getting outrageous. I know it's free and I'm the product, but I'd happily pay a small fee to avoid them.
YNAB does link to CCs and bank accounts and (I believe) sync automatically. I'm enough of a luddite I'm not wild about that, so I just download the transactions from my accounts as Quicken files and load them into YNAB, which automatically parses them and adds only the new transactions. It probably takes <60 seconds to log into my cc account, download the transactions, and upload them to YNAB.

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Re: How do you manage credit card use with monthly budget

Post by pasadena » Fri Jan 11, 2019 12:39 am

I pay off all my credit card on the last day of every month. I live on a monthly budget, and everything resets at the end of the month. I completely disregard statement dates and due dates.

I also use YNAB (on and off) but contrary to others before me, I won't recommend it at the current price. I still use it because I'm grandfathered at the original price ($45 a year). I certainly wouldn't pay $85 a year given the current state.

corysold
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Re: How do you manage credit card use with monthly budget

Post by corysold » Fri Jan 11, 2019 8:28 am

YNAB does download all transactions automatically for any accounts you've linked. It usually updates every hour, so everything is based on when you bank clears it. You can add them manually as well and it automatically matches them when they clear, so you don't get double transactions. It's a nice way to be able to update yourself when you purchase, but not have to worry about missing any transactions or manually inputting every recurring bill that posts.

stan1
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Re: How do you manage credit card use with monthly budget

Post by stan1 » Fri Jan 11, 2019 8:33 am

What is the interest rate in your checking account?

You could just pay the credit cards off more frequently so you don't carry a significant balance. Maybe once per week instead of monthly if you want to look at your budget every weekend. It takes 10 seconds to log in to the credit card website and confirm payment. Unless somehow you have a high yield checking account you aren't making any money off "float".

I have been using this approach for decades. When I see a surplus of cash in my checking account I immediately transfer it to higher yield money market savings account or Vanguard money market fund and then eventually into a longer term investment. I choose to work in $1K increments so transfers look clean but that may be some personal OCD.

Topic Author
schutzk21
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Re: How do you manage credit card use with monthly budget

Post by schutzk21 » Fri Jan 11, 2019 2:38 pm

Thank you all for your responses. I will take all of your suggestions and come up with what works best for me. I really like the idea of just paying everything off the last day of the month. I will test this out and see if it works well.

Is there a certain threshold in your checking account that you don't like to be below?

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cheese_breath
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Re: How do you manage credit card use with monthly budget

Post by cheese_breath » Fri Jan 11, 2019 3:35 pm

schutzk21 wrote:
Fri Jan 11, 2019 2:38 pm
....Is there a certain threshold in your checking account that you don't like to be below?
I like to keep mine above 3 digits, just in case I overlooked something such as an autaomatic withdrawal that only happens quarterly or semi-annually.
The surest way to know the future is when it becomes the past.

nix4me
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Re: How do you manage credit card use with monthly budget

Post by nix4me » Fri Jan 11, 2019 3:59 pm

YNAB user here. Tells me what to pay. I pay the cc amount every week. And I’m striving for 45 days age of money.

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Phineas J. Whoopee
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Re: How do you manage credit card use with monthly budget

Post by Phineas J. Whoopee » Fri Jan 11, 2019 4:35 pm

aristotelian wrote:
Thu Jan 10, 2019 3:32 pm
...
Unfortunately, whatever app or tracking system you use will not impact your actual level of spending.
You're talking about me personally? Fish is fish.

PJW

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Re: How do you manage credit card use with monthly budget

Post by 7BeachbUm0 » Sat Jan 12, 2019 4:19 pm

Back in day when money was really tight, my wife and I used a simple method to be sure we could always pay off credit cards regardless of when they were due. We entered credit card charges in our checkbook just like checks so you always knew exactly how much money you had to actually spend. When the credit card bill came due all those charges were added back to the balance and the credit card bill was paid with no change to the checkbook ending balance. It sure helped with our budgeting when we really needed to watch the spending.

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dratkinson
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Location: Centennial CO

Re: How do you manage credit card use with monthly budget

Post by dratkinson » Sun Jan 13, 2019 6:47 pm

The short answer. If you keep more than one month of living expense in checking, then you should never need to worry about your normal monthly checking balance.

You may be over-thinking this.
--Keep 2-months of living expense in checking, plus enough to cover the minimum balance requirement to avoid monthly fee. Don't be penny wise and pound foolish---the extra month of living expense in checking allows you to worry less so keeps your mind calm.
--Deduct your CC payment due from your check register as soon as CC statement arrives.
--If your check register says you are okay, then you have nothing to worry about. If you have a problem, then you have two weeks to backfill your checking account to handle it.
--Reconcile your checking account when the statement arrives and rebalance as required.



The long answer.

My reconciled checking balance is $5K (= ($2K living exp/mo * 2 mo) + $1K min bal req to avoid fee).

All my monthly bills/banking statements are mailed. My monthly investment statements are eStatements.

My investing eStatements arrive during the first week of the month. My mailed banking statement arrives during the second week of the month.

I reconcile my bank statement when it arrives and set its reconciled balance to $5K on that date. I don't need to worry about the rest of the month because I know $5K is enough to cover 2-months of living expense, plus the minimum balance requirement to avoid a monthly fee.

All of my monthly bills are set to pay by ABP (automatic bill payment); some target checking, some target a CC which is then paid from checking. Bottom line: I have enough in checking to cover my monthly bills, no matter how/when they are paid.

I rebalance all accounts (investing, banking) after reconciling my bank statement. As long as I have $5K in checking after reconciliation, then my finances can run on autopilot for the remainder of the month.

Bottom line. I generally only need to think about my checking balance once/mo.


One-time exception. When I have an unusual bill (major auto repair, replacement water heater,...), I try to pay by CC* for the extra wiggle room. In this case I try to remember to increase my next reconciled checking balance enough to cover the 1x expense.

* My backup plan. If I must, I have 2 checking accounts from which to pay for unusual expenses. My 2nd checking is set up on 9-mo of livings expense in mmkt (VMSXX)---part of my 1st-tier EFs.

If I forget to add a 1x expense to my next reconciled checking balance, then I remember it when the CC statement arrives, I record it in my check register, and the check register tells me I have a problem. I then have 2-weeks to ACH to backfill checking to (1) cover the CC bill. (2) Or I can call the CC company and pay the amount early by phone payment. Either way, the problem is solved. (The second method also works if you have an unusual expense that would exceed your monthly CC limit; just pay your CC early by phone, then put the new expense on your now $0-balance CC.)

Known exception. I know my reconciled checking balance must rise in April to pay property tax.


You may be over-thinking this. Keep 2-months of living expense in checking, plus enough to cover the minimum balance requirement to avoid a monthly fee. Update your check register as each CC statement arrives. Normal bills? No worries, mate. Unusually large bill? You have two weeks to handle it.



14 Jan, second thoughts.

Leaving money on the table. You may worry that by keeping more money in ~0%-interest checking that you are leaving money on the table that could be better used to invest for a higher return. Not so*.

Money is fungible. Set up your monthly/annual bills to be paid by ABP targeting a 2% CC. Since you will earn 2%/yr tax-free from CC cashback to pay your annual bills, this means you can keep 1yr of living expense in your 1st-tier EFs (checking, savings, mmkt,...).

* Since the CC is paying you 2%/yr tax-free---better than most CD rates---keeping 2mos of living expenses in checking is not "leaving money on the table".

It's easier to have larger 1st-tier EFs if you earn more on them. And since you are being paid by the CC, you don't need to chase bank teaser rates. Not chasing bank teaser rates keeps your financial life simple.



Running on empty. It costs just as much to run a car with the tank on Empty as it does on Full. But keeping the tank nearer Full allows you to worry less, and gives more trip flexibility.

Keeping =>2mos of living expense in checking allows you to worry less, and gives more financial flexibility.



Bottom line.
--Set up your monthly/annual bills to be paid by ABP using cashback CC.
--Keep =>2mos of living expenses in checking (1yr total in 1st-tier EFs: checking, savings, mmkt,....).
--You're not leaving money on the table, because: money is fungible, 1yr of liquidity gives financial flexibility.
--Don't chase bank teaser rate. Bank relationships chosen for convenience keep your life simple.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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