tracking spending

6 Smart Reasons to Pay Your Credit Card Bill Before It's Due

Tim Lemke — Wed, 05 Jul 2017 09:00:11 +0000

We all know there can be dire consequences if you are late in paying your credit card bill. But is there also a benefit to paying your bill early?

It may seem unnecessary to pay your bill any sooner than required, but there are some advantages to sending in your payment earlier.

1. It frees up your credit

Most credit cards have a limit to the amount you can charge. But you can actually charge more if you pay off any spending right away. This is helpful if you plan to use the credit card to make a big-ticket purchase. It also makes sense if you plan to travel, because hotels, airlines, and rental car companies can place holds on your card that may last several days, or even as long as a week.

2. It can improve your credit score

The easiest way to prove to the credit bureaus that you are creditworthy is to pay your bill, and paying it off early can only help. Moreover, credit bureaus base your debt on the total at the end of the statement cycle. So if you can pay off debt before the cycle even ends, it reduces the debt reported. (See also: How to Use Credit Cards to Improve Your Credit Score)

3. You'll do a better job of tracking spending

If you get in the habit of paying off credit card charges as they come in, you will likely check your balance more frequently. By doing this, you will be more aware of how much you are spending, and on what.

4. It reduces the interest you are charged

If you've carried over a credit card balance from the month before, interest is charged each day, so it can accumulate over the course of the month. If you pay part (or all) of your bill early, that means you will have a smaller average daily balance and lower interest payments. (See also: 7 Ways to Lower Your Credit Card Interest Rate)

5. You'll chip away at debt faster

Consider this: If you direct money to pay off your credit card bill as soon as you can, that means your money can't be used anywhere else. In essence, you are preventing yourself from spending cash on something that might be wasteful. You are making a commitment to use money to pay off debt rather than add to it.

6. You'll be less likely to forget about it

When you pay bills only after you see the final monthly statement, mistakes can happen. Bills can get lost in the mail. You can set it aside but lose it between the couch cushions. But if you are in the habit of checking your credit card balances and making payments frequently, you'll be less likely to have a problem. (See also: How to Never Make a Late Payment on Your Credit Card Again)

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This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How to Help Your Kid Build Their First Budget

Emily Guy Birken — Thu, 16 Feb 2017 11:00:09 +0000

Teenagers need guidance to build their first budget. But with sporting events, extracurriculars, and homework to worry about, it can be easy for parents to let budgeting skills fall through the cracks. And if you were never taught how to budget by your own parents, you might not know how to teach your children this skill.

Helping your teenage child create a budget does not have to be overwhelming or time consuming. The important thing is to be proactive and consistent as you teach your teen how to handle money in the real world.

Offer a Monthly Allowance

Providing a monthly allowance will help your child recognize the importance of long-term money planning. If they blow the entire month's worth of allowance in the first weekend, they'll learn an important lesson in delaying gratification. The most important thing you can do is be consistent about paying the allowance each month, and refuse to bail your child out of a problem if they use up their money before the month is over.

If your teenager also decides to take a job, consider that a supplement to their allowance, rather than a substitute. Just as you would hate to see your initiative at work penalized by a reduction in pay, your child would hate to see their allowance docked just because they're showing initiative in getting a job.

Require Them to Take Over Some Necessary Spending

Many parents allow their teens to use their allowance and salary as pocket money. While there's nothing wrong with letting your kid have fun money, a big part of budgeting is making sure you have enough money to cover fixed bills. You can help your teenager learn to do this by asking them to take over a necessary bill.

For example, you could ask them to cover a portion of the family cell phone plan, or their portion of the automobile insurance. Learning to pay these bills on time will give your teen an important first taste of what it will be like to pay their own way as an adult.

Create Targeted Savings Accounts

It's likely that your child has some big goals for the future, whether that's going to a private college or buying a car. You can show them that they can achieve these financial goals through targeted savings accounts.

Many banks allow you to create several targeted accounts, each with its own nickname. You can help your teen set up a few of these targeted savings accounts and encourage them to transfer some of their allowance or salary into the accounts when they get paid. They'll learn the importance of paying themselves first, and that consistent savings adds up. (See also: Build Savings Faster With a Multiple Account Strategy)

Help Them Track Their Spending

Financial tracking is a necessary part of creating a healthy budget. They should know where their money is going each month, and whether those expenses were worthwhile. If they discover they're spending a good portion of their allowance on going to the movies, introduce options to them, like discounted movie passes or skipping the popcorn, soda, and snacks while there. Remind them to spend their money consciously.

Have Regular Budget Meetings

Plan on checking in at least once every two or three months to see how their finances are faring. They should get into the habit of reviewing how they've spent their money and whether those expenditures align with their goals. This will set your teen up to regularly review their budget on their own, and one day have regular budget meetings with their spouse.

Teach Your Children Well

Budgeting is the cornerstone of financial health, but knowing how to budget is hardly intuitive. Spending can easily become automatic and savings be pushed to the back burner. By getting your teen used to reviewing their finances and planning for their future, you're creating a powerful habit that will guide them wisely for the rest of their lives.

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This article is from Emily Guy Birken of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The "I Knew It!" Benefit of Expense Tracking

Philip Brewer — Tue, 11 Dec 2012 10:36:49 +0000

It's worth tracking your spending because it's the only way to learn where your money is going. But it's worth doing for another reason as well. (See also: Track Your Spending. Or Not.)

Unless you're tracking your spending, you don't really know where your money is going. Not even if you know to the penny how much goes for your mortgage or rent payment, your car or student loan payment, your tuition payment, and all the other big bills in your life. That's because, as anyone who has ever tracked their spending can tell you, there's a lot of money in the small payments.

If you're not tracking your spending, you have no idea how much money is just leaking away in dribs and drabs, going for coffee shop coffees, fast food lunches, drinks with the boys, no-special-occasion gifts for that special someone, new gadgets, overages on data plans, pet food, lawn care products, vending machine snacks...

Getting a handle on that spending is the big reason to track it. But there's another reason — it's deeply affirming to confirm your sense that those big payments really are as big as they seem.

When I first started tracking my spending, I was only a little surprised to see that my biggest spending category was taxes. (And that was just federal income taxes, state income taxes, and FICA. I never drilled down to the level of breaking out sales tax, which would have added several percent to the tax category.)

My response, the first time I saw the pie chart with the biggest wedge being the one marked Taxes was, "I knew it!"

If you're one of the many readers working hard to pay off debt, seeing a big wedge of spending going toward debt repayment can be rewarding as well — all your effort and discipline reflected in a brightly-colored wedge. (This is true even though debt payment isn't really an expense.)

Those big wedges show what you're paying toward your most critical needs and most cherished wants. (Taxes being a special case — but surely staying out of prison is high on the list of needs and wants.)

Your spending should reflect your values. The big win of tracking your spending is that you can see whether it does or not. When you find a mismatch, you can adjust your spending to reflect what you really want.

That's a big win. But it may be an even bigger win when you find that there isn't a mismatch. It's great when you look at the top ten categories of spending and can say, "Yeah, I knew that. That's not only what I expected, it's just the way I think it ought to be."

There's real comfort in that.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Create Your Own Raise

Philip Brewer — Tue, 05 Jun 2012 10:00:12 +0000

If you're one of the many who hasn't gotten a raise since 2007, perhaps you need to create your own raise. (See also: Replacing a Crappy Job)

It's a simple concept — cutting your expenses by a few percent is effectively the same as boosting your income by a few percent. In fact, it's better, because you'd have to pay taxes on any extra income, while reducing your spending is tax-free. (In fact, reducing your spending often means you pay less tax — less sales and excise taxes.)

Of course most people have already thought of this and have already cut their spending as much as they figure they can without cutting their standard of living. Most people are wrong.

You can verify that with this simple two-step process.

1. Track Your Spending

Unless you've been tracking your spending, you almost certainly have no idea where a big chunk of your spending is going. I can just about guarantee that if you go through the exercise of tracking your spending, you'll discover that 3%, 5%, 7% of your money is leaking away. Maybe it's going for fancy coffee drinks or your bar tab or workday lunches or the office vending machines or groceries that spoil before they get eaten. I don't know — but unless you're tracking your spending, you don't know either.

I've got a post that's on topic — Track Your Spending. Or Not.

2. Identify Some Economizations

If you were trying to completely remake your finances, you'd have to look at the top of your spending — at the big items such as mortgage or rent, car payment, stuff like that. But let's put those aside for a bit. You're just looking to create a raise — a raise that would likely have been only 3% or 4%, if you'd gotten one.

When all you need to find is 3% or 4%, there's a lot of room at the bottom — in the small expenses and especially among your little luxuries

If your income has been stagnant for a few years, you probably don't feel like you've got many luxuries any more — because you haven't added any new ones in a while, and you got used to the old ones long ago.

To that end, I'd like to suggest a little mental trick for identifying your luxuries — pretend you're going through someone else's budget.

Imagine an acquaintance has come to you for help making a budget. Imagine that they've been living a bit beyond their means. Imagine that, even though you're pretty sure that they don't make any more money than you, you've noticed that they've been buying stuff that you can't afford. Imagine that the whole thing has caught up with them, and they desperately need to economize.

Then look at your notes on where your money's been going and tell your "acquaintance" where they might economize.

Of course, they're no doubt strongly wedded to their luxuries, just like you are to yours, but so what? They need to economize, and you're there to help.

I made a similar suggestion in this post — On Choosing and Defending Your Luxuries.

Here are a few thoughts on where to look:

What little expenses do you pay cash for (or casually swipe a debit card for)? If you could cut just a dollar or two per day, you're instantly saving hundreds of dollars a year.
What expenses are just old habits? I once got into the habit of having dinner out once a week, because I had a class that kept me from going home at dinnertime. But I continued even after the class ended, because I enjoyed it. I only cut it when I did the math and realized what the expense added up to.
Especially look at your recurring expenses. Could you raise a deductible on your insurance? Go to a cheaper plan for your cell phone or internet service? Find a less expensive fitness center? Cut your utility bill by adjusting your thermostat and switching off things you're not using?

Unless you've gone through this exercise already this year, I have no doubt you can cobble together a few little cuts that will add up to a 3%, 4%, or even 5% raise.

Next Year's Raise

Hopefully the economy will be better next year, and you'll get a real raise. But we've been hoping that for a while now. Just in case it doesn't work out that way, take a step now toward creating next year's raise.

Specifically, go back to those big things that I suggested you postpone taking a look at.

The reason I had you start with the small things is that saving money on the big things (things like housing and transportation) usually requires a long lead time — but that's okay; we've already taken care of this year. Now you're looking ahead to next year. You have the necessary long lead time.

By looking for economizations among the big things, I'm sure you can create your next year's raise.

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Quick Tips for Organizing Your Finances

Craig Ford — Wed, 16 Feb 2011 13:36:14 +0000

Do you ever find it hard to juggle your personal finances? I do. I keep having this awful feeling that I’ve forgotten to pay a bill or something. Those thoughts are a clear reminder that I need to do a better job organizing my finances. (See also: Financial IQ Test: How Healthy Is Your Budget?)

In case there are others in need of financial organization, I’ve included these tips.

1. Reduce Your Total Number of Financial Accounts

Most people could only dream about a situation where there they have one bank account, one credit card, and one brokerage. We’ve developed a complicated financial system where there’s a credit card for online, one for the gas station, and one for overseas. Then there’s the bank that gives high interest, the bank that gives cash back, and the bank that has minimal fees.

All this juggling and shuffling accounts gets too complicated. Get online and reduce your total number of accounts.

2. Amalgamate Financial Accounts into One Institution

Do you have a bank account at one place, a credit card through another company, and investments with a different brokerage?

Is there a bank or financial institution that will provide all those services in one convenient location? When you’re dealing with a single entity, the process of maintaining your finances is simplified.

3. Find an Effective Financial Tracking System

No matter how much you amalgamate and reduce your accounts, there is still the issue of tracking everything. Finding simple-but-effective personal finance software will allow you to easily track all of your accounts in one place. For over a year I’ve used Moneydance, and I’ve found it helpful to see an overview of my finances in one click.

4. Establish a Good Filing System

One of the biggest costs associated with financial disorganization comes in the form of missed payments. Just this week I found a bill on the fridge that was hiding under another piece of paper.

You can add a file for unpaid bills in your filing cabinet. However, if most of your bills are electronic, you can create a folder on your computer for unpaid bills.

One concern is that these bills might be buried, so you need to have a system for regularly checking both the physical and computer folders. You might consider setting up a computer reminder to be sure you are regularly checking the folders. So, for example, on the 10th and 20th of every month, you would open those folders and pay all those bills.

You could also consider setting up automatic payments, but there is also the danger that you might overdraw your account if you don’t properly monitor all your payments.

5. Keep a Regular Schedule

This one has been killing me lately. My wife and I used to sit down for 15-30 minutes once a week. At that time we would enter receipts into our budget, pay bills if necessary, and talk about any financial changes we need.

However, lately we’ve been out of that rut, and after a couple of weeks the pile gets so big, it’s intimidating.

Small, regular tasks are much easier that big jobs done infrequently.

6. Always Have a Notebook Handy

I have one in my car and one by my office desk. When I buy gas, I can record the information. When I think of a financial task that needs to be done, I can just jot it down to take care of at the next scheduled time to process payments.

If you’re looking for more tips, here are 28 tips for organizing your finances, how to organize your finances in four easy steps, and ten ways to organize and simplify your finances.

This article is from Craig Ford of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways to Save Money in the New Year

Scott Gamm — Fri, 14 Jan 2011 15:00:12 +0000

What better way to start 2011 than with an action plan on how to save money? Here are five easy ways you can save money without changing your lifestyle.

1. Use Your Smartphone for Deals

Do you have a smartphone? If so, be sure to download apps that will search for mobile coupons. For the iPhone, download Yowza!!, MobiQpons, and Save Benjis. With these apps, a barcode appears on the screen of the iPhone, and the cashier will scan the barcode and give you the discount. No need to print the coupons! For the Andriod, download the Google Shopper app, which allows users to scan the barcode of any item in the store and the app will compare prices among different retailers. And for the BlackBerry, visit 8coupons.com and CouponWinner.com (if you have Internet on your BlackBerry).

2. Improve Your Credit Cards

Call up your credit card companies and ask them to lower the interest rates on your credit cards — ask to speak to a supervisor if necessary. By making this phone call, your rates should be lowered by 3-5%.

Also, if you have credit card debt, try to pay more than the minimum payment on your credit card bill, even if it's only a few dollars. This will get you out of debt sooner and you'll save money on interest payments.

3. Track Your Expenses

Do you know how much money you spend each month? In order to begin to save money, you need to know exactly, to the penny, how much money you spend. This will allow you to determine where you are wasting your money. For example: Are you spending $150 month on coffee each month? Are you spending $200 each week by eating out at restaurants? To help you figure out how much money you spend, use this free Expense Calculator. Also, if you have an iPhone, for $4.99 you can download the iXpenseIt app, which enables users to take a picture of their receipts after they make a purchase. The app stores the receipt's data, allowing users to easily track their spending.

4. Shop with Cash Only

When shopping, leave your credit cards at home and use cash instead. At some point, you're going to run out of cash, which will force you to stop shopping, whereas with credit cards, there are no boundaries and you can easily rack up thousands of dollars without even realizing it. Plus with cash, you don't have to worry about interest rates, late fees, or damage to your credit score by accumulating debt or by not paying the bill on time.

5. Set Goals

You probably have a few New Year's resolutions. If it isn't already, make one of your resolutions for 2011 to save money and be conscious of your spending. Challenge yourself! For example, promise that you're going to use cash only for the next three months. After completing that challenge, chances are you'll stick to cash and never go back to credit cards, which is a huge financial success.

This article is from Scott Gamm of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

8 Tips for Improving or Starting a Budget

David Ning — Thu, 23 Dec 2010 14:00:11 +0000

Budgeting is boring and takes precious time out of our busy schedules. But let me tell you something — having a solid budget works incredibly well for your finances. When done properly, budgeting can help you save, keep you motivated, and increase the chances that your finances are headed in the right direction so eventually, you have time to do what you want to do. And who wouldn't want that? If the whole budgeting process is just not cooperating, check out these eight pointers that will make your budget work for you. (See also: If Budgeting Isn't Fun, You're Doing It Wrong)

1. Be Realistic with Your Budget

Some people like to setup their dream budget instead of one for their current situation. Remember that a budget needs to be tracking what you are actually spending so you can make changes.

2. There's No "Fun" Fund

This again goes back to being realistic. Can you actually live without having fun for years and years? Allocate a portion of your monthly budget so you can spend it however you want. After all, the whole point of saving money is to use it.

3. Adjust It Regularly

In order to grow, you need to continuously improve on your system. This includes changing limits on your budget and adding/subtracting categories of expenses as you see fit to make life easier for yourself. You don't have to start off with the perfect budget, but the goal should be to always try to make it a little better.

4. You Need to Allow for Budget Busters

How would you handle the months when you have no choice but to go over the allotted limits you set on your expenses? You have to plan for that so it doesn't throw your finances upside down. You need to have an emergency fund set up, and another way is to actually have the exceeded amount "spill over" to future months, so you don't forget about it. For example, if you spent $500 over your budgeted amount on entertainment, the $500 would be added to the following month, which reminds you to spend less in the future to make up for it.

5. Focus on the Process Instead of the Tool

There is no perfect tool. There, I said it. The key is you — the data you put in, and your commitment to follow what you have set up. Some people use a plain spreadsheet while others buy software like Quicken. Do whatever works for you, but don't obsess over which way is best.

6. Keep It Simple

Unless you love tracking your budget and can spend hours every week on this task alone, please don't have too many categories, and try to simplify the process of logging your expenses. The simpler you can make your budget, the better! The key is to really think about your categories and whether separating them makes sense for you. Some people may consistently buy skin care products, so it makes sense for them to separate them into their own category so they can monitor how much they are spending on those products. Others may find that it makes little sense to have a category even for beauty products because they almost never spend anything in that area. Make it personal, but keep it simple!

7. Give the Budget a Chance and Some Time to Thrive

Very rarely do you see people executing their budgeting process to perfection right out of the gate, so those who expect everything to work out perfectly are setting themselves up for failure. As with anything, it takes constant monitoring to improve, and eventually, it will work well for you.

8. Make Progress

Whether it's lowering your spending or increasing your income, make progress! Having better finances will be the number one motivator to keep doing your budget. Always think how you can do things better, and you will be financially free in no time. Let me repeat — budgeting is boring, but it's an easy way to improve your finances. Here are seven more reasons why you need to start budget tracking.

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This article is from David Ning of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Be In Charge of Your Finances

Philip Brewer — Fri, 03 Sep 2010 12:00:05 +0000

Do you ever come to the end of the money before you run out of month? It's easy to conclude that the problem is that you don't earn enough money (or that you spend too much). In fact, the real problem is almost always that your finances are out of control.

I don't want this post to turn into a comedy routine with a list of items like, "Your finances might be out of control if you ever use a credit card to pay off another credit card." Frankly, if your finances are out of control, you already know it (although you may be in denial). Still, here's a short check list:

You don't have an emergency fund.
You don't pay off your credit cards every month.
You don't know how you'll satisfy your big, high-priority wants (like college for the kids).
You worry about the bills (or about money in general).

Taking control of your finances is straightforward. I've written articles about most of the steps, but it occurred to me that I've never really put the whole thing together. So, for those of you who have problems that look like a lack of money (or excess spending), here's how take charge of your finances.

Take control by buying what you want

I've carefully buried a certain word in this sentence, because I'm afraid that the word budget will turn off a lot of readers, and I'd like to ease them past it. There are two reasons that people hesitate to make or follow a budget.

The first is that they come to budgets with a sense of guilt. That's crazy. If you'd rather spend money in some other way than what your budget says, don't feel guilty about it: Just change your budget. Your budget is not a constraint, it's a tool for helping you get what you most want.

With that in mind, here are four posts on budgeting:

If Budgeting Isn't Fun, You're Doing It Wrong is all about creating a budget that lets you buy what you want. It's about figuring out what you really want and making sure you're budgeting for those items. Like I said: If you want other stuff more than the stuff that's in your budget, change your budget.

Refactor Your Budget Categories is a short piece on how to organize the categories in your budget. If you have a budget that's working for you, you can skip it. But if you're creating a budget from scratch (or if you're not satisfied with the budget you've been using), it has some useful ideas.

A Better Way to Create a Budget advises against the usual budgeting advice of filling in each budget item with what you spent last month (or last year). Instead, I suggest, start each line item at zero, then figure out what you really need to spend to satisfy your wants and needs in that category.

Your Budget: Envelopes or a Plan? looks at the two main styles of budgeting. I used to follow the envelope model, where I set aside money from each paycheck to cover each expense category, but some years back I quit thinking of my budget as a set of envelopes and started thinking of it as a plan.

Take control by knowing what you're buying

The second common reason that people resist budgeting is that they feel like they're "not the sort of person" who needs to pays attention to every penny. That's not quite as crazy as feeling guilty when they don't follow a budget. It is possible to manage your finances intuitively, and lots of people do. But it's not a sign of moral superiority.

The way to get your finances under control is to create a budget and then track your spending so that you know whether you're following it or not. Neither step has nothing to do with what kind of person you are.

I wrote one post on tracking your spending:

Track Your Spending. Or not. It's on whether the time and effort of tracking is worth the payoff. (And, more important, what the payoff is.)

As I say, it is possible to manage your finances without a budget and without tracking to see if you're keeping to your budget. In fact, most people do just that. If your wants and needs are modest relative to your income, that can work fine. But the less daylight there is between what you earn and what you spend, the more you need to be in control of your finances.

Who's in charge of your finances? You? Or no one in particular?

This article is from Philip Brewer of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: