{"id":205,"date":"2021-07-12T12:00:00","date_gmt":"2021-07-12T12:00:00","guid":{"rendered":"https:\/\/moneywithkatie.com\/how-to-manage-a-budget-when-you-only-use-credit-cards\/"},"modified":"2025-09-05T17:00:16","modified_gmt":"2025-09-05T17:00:16","slug":"how-to-manage-a-budget-when-you-only-use-credit-cards","status":"publish","type":"post","link":"https:\/\/moneywithkatie.com\/how-to-manage-a-budget-when-you-only-use-credit-cards\/","title":{"rendered":"Why I Never Look at My Credit Card Balances: Effective Budgeting 101"},"content":{"rendered":"

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Here\u2019s an interesting, clickbait-y truth for you:<\/p>\n

I set all five of my credit cards to autopay and never look at the balances<\/em>.<\/h2>\n

I don\u2019t really look at my checking account balance, either. I know<\/strong> there will be enough money there to pay off all five of them, every time. <\/p>\n

How?<\/p>\n

Is it because I\u2019m rolling in cash? Nope.<\/p>\n

It\u2019s because I\u2019ve mastered my cash flow with two simple tools: My Wealth Planner<\/a> and the Copilot app<\/a>. <\/p>\n

While majority of my content can be summarized by the phrase, \u201cWE AREN\u2019T THINKING ABOUT THIS ENOUGH! Don\u2019t accept conventional wisdom as gospel truth!<\/em>\u201d, today\u2019s post is the opposite. The headline is: Don\u2019t overthink it.<\/em><\/p>\n

I get a surprising amount of questions about how budgeting by monthly spend works when you\u2019re using credit cards to do all your spending. It goes something like this: <\/p>\n

\u201cI want to budget for the month of July, but my credit card statement closes on July 14. Should I be budgeting from the 14th to the 14th instead? What do I do?\u201d Panic ensues. <\/p>\n

The simple truth about how credit cards impact your budget:<\/h2>\n

They shouldn\u2019t. Seriously!<\/p>\n

If when<\/em> your credit card statement comes due is impacting your ability to budget, you don\u2019t have a budget problem \u2013 you have a cash flow<\/em> problem. <\/p>\n

What does this mean in practice?<\/h3>\n

Every time you swipe your credit card, imagine it\u2019s a debit card.<\/p>\n

That means you can imagine the money is physically leaving your checking account<\/em> the moment you make that credit card transaction. <\/p>\n

It doesn\u2019t matter when<\/em> you actually pay the credit card bill, or where<\/em> you are in your monthly credit card cycle. The credit card is merely a spending tool that functions on a delayed timeline.<\/p>\n

And how do you keep track of all that imagined money leaving your checking account, when in reality, it\u2019s still sitting there? Easy: Having an actual plan.<\/p>\n

So imagine the credit card is eliminated from the equation for a moment:<\/p>\n

If you make $4,000 per month and you\u2019ve budgeted to spend $3,000, that means \u2013 by the end of that month \u2013 you\u2019d have brought more money in than you spent. By definition, this means that \u2013 regardless of where you are in your credit card statement or when it comes due \u2013 there should be enough money in your bank account to cover the bill, simply because more came in than went out. <\/p>\n

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 <\/em>\u2013 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.<\/p>\n

A good budget enables you to spend according to plan without ever looking at your checking account<\/em><\/h2>\n

\u2026though I wouldn\u2019t recommend ignoring your checking account, theoretically, you could. <\/p>\n

Using our example budget mentioned above\u2026<\/p>\n

You might know that, every other Friday, $2,000 hits your checking account. You might also know that on the first of the month, you pay $1,000 to your landlord. The $1,000 should still be sitting there from last month<\/em>, if you spent according to plan. <\/p>\n

This is why we sometimes refer to making purchases with \u201cold\u201d money \u2013 you want the money that you earned last month to be paying for the things you\u2019re buying this month, instead of the money you earn this month (or worse, next<\/em> month) paying for this month\u2019s purchases (that\u2019s effectively what it feels like when you\u2019re paycheck-to-paycheck).<\/p>\n

You\u2019d record your anticipated income for the month \u2013 $4,000 \u2013 and monitor your spending as you go. Once you hit $3,000 spent, you know you\u2019re done. Anything over that $3,000 will dip into the $1,000 you\u2019ve earmarked for saving or investing, and that\u2019s no bueno.<\/p>\n

Without ever looking at your checking account or credit card bill, you become intimately familiar with where you are, spending-wise, in the month. <\/p>\n

The reason why not <\/em>budgeting doesn\u2019t work for 99% of people<\/h2>\n

Let\u2019s think for a second about how spending throughout the month would look without any sort of plan or parameters:<\/p>\n

How would you know how much you can spend? How would you know if you can afford something or not?<\/p>\n

Well, you\u2019d probably look at your checking account.<\/p>\n

\u201cHm, all right \u2013 I\u2019ve got $5,000 sitting here. I can afford this $300 thing.\u201d <\/p>\n

\u2026but what if you\u2019ve got rent due in 5 days? And the credit card bill comes due in 14? And your car payment and car insurance next week? Shit, you\u2019ve got a lot less free-wheeling spending money than you thought.<\/p>\n

When you\u2019re looking at the present balance of your checking account in a vacuum as a gauge for how much you can spend, it\u2019s nearly impossible to make accurate decisions \u2013 because you aren\u2019t taking into account the upcoming expenses that the money may already be earmarked for.<\/h4>\n

For example, if you\u2019ve got $5,000 in checking, your animal brain goes, \u201cGreat, I can spend $5,000.\u201d<\/p>\n

In reality, $1,000 may be earmarked for rent, $3,000 may be going toward the credit card bill, and $500 could be going toward your car payment and insurance \u2013 all within the next two weeks.<\/p>\n

Those are expenses that aren\u2019t immediately obvious to you if you don\u2019t have a plan.<\/p>\n

And you know why? Because humans are inherently bad<\/em> at intuiting this type of shit. It\u2019s not you. It\u2019s all of us. Without a plan, we\u2019re flying blind.<\/p>\n

In that example, a whopping $4,500 of that $5,000 was already claimed \u2013 we just didn\u2019t know it yet, because we weren\u2019t looking ahead. We were looking at the present balance of our checking account and thinking, \u201cDope, $300 is nothing!\u201d In reality, $300 was more than half of the actual<\/em> available balance when you factored out the $4,500 that was needed for upcoming bills.<\/p>\n

And that\u2019s<\/em> the trap of thinking you don\u2019t need a budget.<\/p>\n

We act like budgeting imposes stress and effort on our lives, but in reality, not <\/em>having a plan is often far more stressful<\/h2>\n

And as the Budget Like a Millionaire Masterclass teaches<\/a>, you don\u2019t have to be super granular in your budgeting for it to be effective \u2013 you really only need to know a few things:<\/p>\n