How do I budget effectively with consistent use on my credit card?
I have the most infuriating and unresolved confusion on how to optimize my credit card records YNAB.
A little relevant background: I am an international student and I've been using YNAB to manage my allowance/income whilst in school. Ever since I got a credit card, I use it for practically every purchase (I know this is traditionally not the best habit, but I pay it back at ~50% and the reason I utilize it this much is for good credit for housing and residency). I am also guaranteed to always pay it back fully before deadlines since I never spend more than I hold in my chequing.
Here's the problem, as a result of this mechanism, whenever I budget for my life (groceries, dining out, phone bill, etc.) I've naturally budgeted them in the corresponding categories (not to the credit card category). For example, if I budget $100 for groceries and then use my credit card to pay for $50 worth of groceries, it shows that expense deduction from both the credit card category AND the groceries category. And it shows that I overspent and that I'm in-debt in my credit card even though I have the resources to pay it back, so I end up budgeting for the credit card category too (let's say $100 as well). This means now that I've implicitly double budgeted $200 for groceries no? Am I just to leave my credit card category un-budgeted?
Or did I get the idea wrong? I've been struggling to wrap my head around it and I've tried out some tutorials via YouTube but I've fallen victim to the confusion.
Any help, insight or solutions would be HIGHLY appreciated.
Take the Credit Cards in YNAB class. But here's how it works in short:
1. Budget $100 for groceries.
2. Buy $50 of groceries using the credit card. Enter the transaction on the credit card account, categorized as Groceries. YNAB automatically moves $50 from your Groceries category to your Credit Card Payment category for that card. You can see clearly that $50 of your money is set aside to pay that card, and you only have $50 left for groceries.
3. When you pay the card, enter it as a transfer from your checking account to your credit card account. Your Credit Card Payment category will go to zero, as will your credit card balance.
YNAB works very well for paid-in-full credit card users!Reply
mamster said: Also, did you budget for your existing balance when you added your credit card to YNAB?
^ This is a critical first step in setting up your YNAB budget with a paid-in-full credit card.
Rae said: Am I just to leave my credit card category un-budgeted?
Don't budget to the cc category for new purchases. Budget to the appropriate category and let YNAB move budgeted funds to cc payment for you. If you have old balances, budget directly to the cc to pay off or pay down over time. The green available balance on the cc payment line is all you can send to your cc account.
The Class or the videos on credit card handling would be a good time investment.Reply