Like most people, the past some months in my household have involved a lot of belt tightening and reexamination of financial situation. I’ve done my best to be responsible with the money I earn, currently having no debt other than the home mortgage, which is a reasonable mortgage at that. Live within your means; in fact, try to live well below your means. Still, I kept feeling a crunch. I had spent a bit beyond our means the past some months to stock up on various things, dipping into savings and such. I’m wanting to recover from that but was having a bit of a time digging out. It hit me what was going on and I wanted to try it. It’s only been a couple months so it’s a bit early to tell, but so far the results are promising so I thought I’d share.

What was going on was that I was paying too much towards credit cards every month. I use credit cards because of purchase protections, extended warranties, rewards, and other such side benefits. I pay them off in full every month. But that was the problem. When it came time for me to pay the bills, I always paid the full amount. For example, the billing cycle ends with a $500 balance, but between the end of the billing cycle and the time I get the bill in the mail then sit down to pay bills, I might have charged a few more things and might have $700 on the card. I always figured that I’ve already used the money, send it now or send it later didn’t matter I still had to send it, so I might as well zero out the card. Thus I’d write a check for $700 and zero out the card. Technically that’s a good thing to do, but it was having a subtle side-effect on me. I would look in Quicken and see that we had a zero balance so I would think to myself “ok, we can spend X amount”, but in reality, I had kinda robbed Peter to pay Paul. I try to shave off a good portion of my paycheck every pay period to put into savings, but to pay that credit card bill down to zero I might have to reduce or eliminate that savings. Thus I’d have a zero card balance, but I didn’t get to save as much as I wanted to. And so, I was treading water, paying bills, but not rebuilding my savings.

So instead what I decided to do was just pay the required amount. Bill comes for $500, I pay $500. Sure that might mean at the time of the bill paying I leave $200 (going with the above example) on the card, but that’s fine. It does a few things. First, when I look in Quicken I see there’s already some sort of balance on the card, thus I’m reluctant to put more charges on the card thus spending less. Second, when I do my bill paying now I am saving in full or might be able to save a little more. And so far, that has really been paying off. It’s helped me curtail spending and keep my savings on a good pace.

Yeah, it’s a bit of slight-of-hand, it’s just mentally fooling myself. In the end it’s all about budgeting and such and keeping within your means. But for me, this change helped. I keep bills paid in full, no revolving balances on the cards, but I keep the monthly spending correct for the pay periods and don’t “overspend” because I miscalcuated. My savings is rebuilding at a good click, my spending is reigned in more.

Man… wish I had realized this years ago. 🙂