A credit card isn’t just for spending—it can also help with saving. That’s because your credit card comes with a very useful budgeting tool: the monthly statement.
Whether it arrives in your mailbox or your email inbox, your credit card statement is like a diary that lists where you’re using your card and how much you’re actually spending (you may be surprised). When you sit down and start categorizing the expenses on your monthly statement—think housing, food, transportation, lattes, et cetera—you get a big-picture view of both your necessary and optional expenses, and can create a realistic budget based on your income.
Let’s start with your statement
Grab your latest credit card statement or check online, and read through your purchases or transactions. Then group your expenses into categories. A budget worksheet is useful here. It features common expense categories and makes it easy to add up the money that’s going out, so you can compare it to the money that’s coming in.
Now that you can clearly see how your essential and non-essential expenses stack up to your income, ask yourself some candid questions:
- What expenses are necessary and unavoidable?
- Which ones can I scale back on?
- Is my spending under control so I’d have money for unexpected expenses?
- Am I setting money aside for my savings, retirement, and investments?
- Are my meal takeout expenses affecting more than my diet?
Take an honest look at your expenses, make essential expenses your top priority, and set realistic goals on the spending you have control over, such as groceries, travel, and clothing. Then stick to your budget—and resist impulse purchases, which can spoil even the most carefully planned budget.
Use your card responsibly to help boost your credit score
Now that you know how to budget with a credit card, here are other tips for using your credit card responsibly, which is important for building credit:
- Pay your credit card bill on time.
- Pay at least the minimum balance every month.
- Keep your balance 25% below your credit limit.
- Only make purchases you can pay back quickly.
- Use apps and other technology to help you manage your account.