Once you hit $3,000 spent, you know you’re done. You’d record your anticipated income for the month – $4,000 – and monitor your spending as you go. This is why we sometimes refer to making purchases with “old” money – you want the money that you earned last month to be paying for the things you’re buying this month, instead of the money you earn this month (or worse, next month) paying for this month’s purchases (that’s effectively what it feels like when you’re paycheck-to-paycheck). The $1,000 should still be sitting there from last month, if you spent according to plan.

You might also know that on the first of the month, you pay $1,000 to your landlord. You might know that, every other Friday, $2,000 hits your checking account. Using our example budget mentioned above… …though I wouldn’t recommend ignoring your checking account, theoretically, you could. A good budget enables you to spend according to plan without ever looking at your checking account When the credit card bill for those 30 days comes due a month later, the money should still be sitting there, ready to pay the bill – because you were working from a set budget and treating the money as if it were leaving the checking account as soon as the purchase was made. By definition, this means that – regardless of where you are in your credit card statement or when it comes due – there should be enough money in your bank account to cover the bill, simply because more came in than went out. If you make $4,000 per month and you’ve budgeted to spend $3,000, that means – by the end of that month – you’d have brought more money in than you spent. So imagine the credit card is eliminated from the equation for a moment: The credit card is merely a spending tool that functions on a delayed timeline.Īnd how do you keep track of all that imagined money leaving your checking account, when in reality, it’s still sitting there? Easy: Having an actual plan. It doesn’t matter when you actually pay the credit card bill, or where you are in your monthly credit card cycle. That means you can imagine the money is physically leaving your checking account the moment you make that credit card transaction. What does this mean in practice?Įvery time you swipe your credit card, imagine it’s a debit card. If when your credit card statement comes due is impacting your ability to budget, you don’t have a budget problem – you have a cash flow problem. The simple truth about how credit cards impact your budget:

Should I be budgeting from the 14th to the 14th instead? What do I do?” Panic ensues.

“I want to budget for the month of July, but my credit card statement closes on July 14. I get a surprising amount of questions about how budgeting by monthly spend works when you’re using credit cards to do all your spending. While majority of my content can be summarized by the phrase, “ WE AREN’T THINKING ABOUT THIS ENOUGH! Don’t accept conventional wisdom as gospel truth!”, today’s post is the opposite. It’s because I’ve mastered my cash flow with two simple tools: My Wealth Planner and the Copilot app. I know there will be enough money there to pay off all five of them, every time. I don’t really look at my checking account balance, either. Here’s an interesting, clickbait-y truth for you: I set all five of my credit cards to autopay and never look at the balances.

You need a budget credit card payments