Viewing a single comment thread. View all comments

FerrociousButtn t1_j1z9nv4 wrote

Reply to comment by BraveCheesecake6090 in How to incorporate credit into budget? by BraveCheesecake6090

I think what they were saying is that you should create your budget independent of your credit. E.g. your income of $x,xxx with $xxx going into savings, $xxx for expenses, etc. The only time your credit comes into play is using it to pay for those already budgeted expenses. I cannot stress enough that you should only put what you can pay off immediately on your credit card to avoid carrying a balance and creating debt. Even by putting small purchases on your card will build credit if you pay it off in full at the end of the cycle.

2

BraveCheesecake6090 OP t1_j1zcb1w wrote

Ok I think I understand, I thought the wisdom was to keep the balance to what you can pay by the end of the month. I’m not suggesting I increase my budget for x BECAUSE of credit but rather suggesting if it would be a wise choice to “replace” my usage of the “variable” debit card with the credit card so that by the end of the month I have a full pay check stashed away to use to pay off the credit card amount RATHER than the current system when I have half a paycheck every 2 weeks, with the first “2 weeks” having a fair portion going immediately to bills. Obviously there are ways to budget around this so it doesn’t feel like I have significantly more money in the second half of the month than I do in the first half but I wonder if it would be easier to think and plan around those expenses using a credit card — although perhaps just moving all my utilities into the card all together would be easier? And then just using the $200 or so saved on the “static” account to go towards the credit balance EOM ?

1

DeluxeXL t1_j1ze8mk wrote

Based on your comment, you still have the mindset of someone living paycheck to paycheck.

Once you have a one-month buffer in your checking account, when you get paid and when expenses are paid no longer matters.

2

BraveCheesecake6090 OP t1_j1zf4pv wrote

Hm i wonder if that’s a symptom of how I have my finances organized. I’m in the process of turning my 1 month buffer I currently have into a healthy 3-6 month emergency fund. It’s a little juvenile but it keeps all the bills paid on time, a consistent amount going into savings, kitchen stocked, etc. but does keep me perhaps overly wary of larger purchases like new (and needed) furniture.

1

DeluxeXL t1_j1zfrjc wrote

> I’m in the process of turning my 1 month buffer I currently have into a healthy 3-6 month emergency fund

They are not the same thing. You should put the emergency fund in a separate savings account. Your one-month buffer stays in the main checking account.

Open a 3rd account to save for short term needs, like furniture and sinking funds.

2

BraveCheesecake6090 OP t1_j1zgp7p wrote

Ah ok! This was something I had been thinking of doing once I hit 3 months in the emergency fund. (Holiday spending might have set me back a bit but I should be to that point by the end of February or so)

This is my first job out of college and I was basically broke once I took it after paying for associated moving expenses so savings has been a little slow.

1