So far in my series of posts where I’ve been sharing my thoughts on The Capital One Mastercard, Exclusively for Costco, I’ve discussed how to choose a rewards credit card so that you get rewarded for money you’re spending already. But something not often touched on with credit cards is how you can use them to help you create a budget and track your spending.
The Importance of Budgeting
Budgeting is important because it helps you ensure all bills are covered and sets limits on your spending, all within the amount of income you bring in. To improve your financial situation, you have to increase your cash flow by spending less than you make.
To budget properly, you need to know where you’re spending your money. This isn’t so easy if you spend mostly cash, though it can be done if you keep a notebook on you or save all receipts.
How to Plan a Budget and Benefit from Rewards
Using a credit card can help you keep track of your spending so that you have a meaningful budget that you can stick to. If you put all your spending on one card, then the statement becomes your monthly spending report. And likely all cards now allow you to login online to review your spending every day. Then, every month, you simply use your paycheque to pay the credit card bill.
But if you’re doing all your spending on a rewards card, not only can you track your spending, but you’ll also be earning towards a nice cash back reward at the end of the year. This payment can help fund an annual budget goal like saving into an RRSP or TFSA.
How You Can Use Your Credit Card to Reduce Your Budget
I use a credit card for all my purchases and it also helps me stay within budget since I get cash back rewards on my purchases.
If you are shopping at Costco quite a bit like I do, reduce your spending budget for the year even more by getting Costco’s Executive Membership and receive another 2% annual rebate on most of your Costco purchases.
A credit card is a tool in your personal finance toolbox. Helping you create a budget and earning rewards are just a couple examples of the benefits when you use it responsibly!