Credit Card by 401(K) 2012 on Flickr
Over the last few months, I have taken time off from Free Zero Based Budgeting to work on another project called Find Mu. Now that I have Find Mu launched and stable, I am able to start back up with the FZBB blog. I left off with our family decision to get a credit card for use online and for major purchases.
In my last post, I left off talking about our struggle to fit credit card use into our rock solid zero based budgeting habits. The reason the credit card was causing the turmoil lies in its reactive payment structure. You buy something on the credit card and do not have to pay for it until a month later. In typical zero based budgeting terms, this is completely backwards. In zero based budgeting, all expenses get accounted for before you have the money in hand. Having a credit card can break this delicate cycle.
It took us a few months, but we’ve settled down with the credit card. It is now acting solely for the purpose we intended, online and large purchases. We now added a credit card category to our FZBB budget tool and we budget into the credit card slot any purchase we know is going on the credit card. We are trying very hard to stay away from putting small impulse purchases on there. For the most part we are succeeding.
In our typical month, all the non-credit card purchases work as they did in the past. We budget them, and they get paid as scheduled or pulled out in cash. Then the credit card gets used for the intended purchases and at the end of the month, we send in a payment. The first few months were tough, but the last few have been near perfect.
The first few months, that initial feeling of having money (even though you do not) really hit hard. “Hey you want to go out to dinner tonight?” instead of making it at home. Sitting in the car on the drive home and stopping for gas even though you don’t have the cash in hand. You take small unplanned trips to Target or the grocery store. It is amazing how quickly $10 to $20 dollar charges add up. You can rack up $500 dollars that way in no time. Then you get to the end of the month and see how much you actually spent. Credit cards can enable nasty habits. I always laugh to myself when I hear someone say that they are responsible with their money, so credit cards will be no different. That is much easier said than done.
In the end, there are many benefits to credit card use. In an ever-increasing security threat online, our draw back into the dark world of credit simply involved shifting our online purchase liability to a major credit card company.
Next post I will talk about how my wife and I afford the holidays. With 3 young children and an obscene number of nieces and nephews, each year is becoming more and more costly.
