top of page



14 Helpful Tips For Maintaining A Good Credit Score / Chris Muller


Maintaining a good credit score is vital if you want to apply for loans or credit cards. Follow these 14 tips and you're sure to stay in good standing. There are plenty of things you can do to maintain the good credit score you’ve worked so hard to build, and one excellent reason why you should care: money.

A good credit score typically means lower interest rates, and that means more cash in the bank. It’ll also be easier for you to get loans and credit.

With that said, here are my top 14 tips for keeping up your credit score.

1. Treat all of your debts equally when it comes time to pay

Your credit score takes into account both revolving debt (credit cards) and trade line or installment debt (mortgages).

It doesn’t matter that your line of credit, for instance, has a lower interest rate, you shouldn’t prioritize other loans if it means neglecting that payment. Constantly having a balance on your credit cards can lower your score and hurt your chances for getting approved for loans or any other credit card accounts you may want to open.

2. Keep old credit cards open to maintain the longer history

There are a few reasons why keeping old cards open can benefit your credit score, and one is the length of your credit history, which accounts for 10 percent of your score.

This is especially important for older cards, because they give your credit report a longer record, and this’s good.

3. Consolidate cards to have fewer balances

Having a number of small balances spread out over several different cards may seem smart, but this approach can actually backfire if you overuse it.

Instead, John Ulzheimer of Credit Sesame says you’re better off paying these amounts down. “A good way to improve your credit score is to eliminate nuisance balances,” he says. This is because having multiple cards with balances can lower your score rather than boost it.

If you’re looking to pay off credit card debt quickly, consider a balance transfer card to consolidate all your monthly payments onto one card.

4. Make sure you pay every bill on time, every time

Your payment history accounts for 35 percent of your credit score. If you have trouble keeping your bills in order and staying organized with payments, set up electronic billing and payment reminders to stay on top of your bills. If you aren’t good at keeping track of what’s due when don’t worry, there’s an app for that.

If you’re terrible with being on time, you can set up auto payment plans through your bank or with your credit card to ensure that bills are paid for you, on time, every month.

While you’re paying credit card bills and rent on time, make sure you also get credit for paying for your utilities and phone. You can sign up for Experian Boost, link your bank account, and get credit for paying those bills on time, too. The service is free and includes a free credit report and myFICO score.

5. Try not to rack up the balance on your credit cards

If you have one credit card with a $1,000 limit and have a $500 balance, your credit utilization ratio is 50 percent. Aim for 30 percent or lower.

The people with the best credit scores only use about 8 percent of their available credit.

6. Keep an eye on your credit report and make a stink about errors

Errors on your credit report are more common than you might think. Luckily, you can keep an eye on them by taking advantage of the free yearly credit reports you’re entitled to from TransUnion, Experian, and Equifax.

When you get the reports, go over them carefully to look for errors, and get on the horn right away to dispute ones you find.

7. Avoid applying for new credit whenever possible

New credit applications account for 10 percent of your score. Each time you apply for credit that prompts a hard inquiry into your report, your score will take a hit. Unless it’s absolutely necessary, don’t apply for new credit cards or loans if you want to keep your score up.

8. Make payments in full when possible, and otherwise pay at least the minimum

There are at least two reasons why you should never just pay the minimum on your cards, and one is because this is a terrible way to pay off debts! Paying just the minimum means even small debts could be stretched out over years, and this means exorbitant interest fees.

However, if the minimum is all you can manage, make sure you pay at least that every month, otherwise you’ll have late or missed payments on your report for seven years.

9. Creditors are real people too, so contact them if you encounter problems

If anything should ever happen and you face financial troubles that could affect your ability to pay your bills, then call your creditors right away. Often, you’ll be able to arrange alternative payment solutions, negotiate a lower interest rate, or otherwise mitigate the situation.

10. Live within your credit means and don’t exceed your limit

According to Wells Fargo, a 20/10 rule is a good rule of thumb for credit. Don’t “let your credit card debt exceed more than 20 percent of your total yearly income after taxes. And each month, don’t have more than 10 percent of your monthly take-home pay in credit card payments.”

11. Chip away slowly to reduce your overall debt load

If you currently have debt of any kind, taking steps to eliminate it will gradually improve your credit score. Stop using your cards, make a budget, and start paying down your high-interest cards first while maintaining minimum payments on all the other debts.

12. Get all your rate shopping done within a two-week period

To avoid having inquiries impact your score when you apply for a new loan, finish your rate shopping within two weeks because there’s a 30-day grace period during which inquiries won’t affect your score.

13. Consider using a credit monitoring service

Credit monitoring services like Credit Sesame watch your credit daily for unexpected changes. On top of alerting you to dips or increases in your score, it can also serve as an early warning sign of identity fraud.

14. Use credit boosting services

There are a couple of innovative ways of boosting your credit score, above and beyond the ordinary “pay on time” methods. One company is Self, helping individuals take out a loan and pay it off each month. Whenever you make a payment, they’ll report the good behavior to the credit bureaus and your credit score and profile will likely improve.

Another is Experian Boost, which allows you to include your positive payment history for utility bills and cell phone bill payments to your credit score – payments which otherwise would not affect your score at all. Best of all – the service is completely free.

Summary --

There are a couple of innovative ways of boosting your credit score, above and beyond the ordinary “pay on time” methods. One company is Self, helping individuals take out a loan and pay it off each month. Whenever you make a payment, they’ll report the good behavior to the credit bureaus and your credit score and profile will likely improve.

Another is Experian Boost, which allows you to include your positive payment history for utility bills and cell phone bill payments to your credit score – payments which otherwise would not affect your score at all. Best of all – the service is completely free.

6 Ways To Trick Yourself Into Saving More And Spending Less

How much you spend or save is a result of habit. That's good news, because it means you can trick yourself into saving more. Here's how.

You know that if you do enough abdominal crunches and jumping jacks, your stomach will get stronger and you’ll lose some weight.

According to psychology experts, the mind is just another muscle that works the same way. If you exercise the brain, you can strengthen your financial health, and lose some of that money-related anxiety.

We asked Ryan T. Howell, Ph.D, an Associate Professor in the Psychology Department at San Francisco State University and co-founder of Beyond the Purchase, a think tank about how and why people spend money, to explain how you can use the power of the mind to trick yourself into buying less, paying down debt, and saving more.

Post visual reminders of your financial goals in strategic spots

Saving for something big, like a vacation? Or trying to get your credit card balance down to zero? Place a visual reminder in places you look at a lot.

For example, print out a picture of your next ideal vacation destination, and wrap it around your debit card, or change the background photo on your cell phone. If you’re a big online shopper, but want to wipe out your credit card debt, change the background image on your computer screen to a big fat zero.

“This helps take the emotional excitement out of buying and makes it a deliberative, cognitive process,” Ryan says.

Find a cheaper phone plan

Many of us spend a lot more money than we need to on our phone plans. There are many alternatives to high-price, big-name phone carriers—take FreedomPop for example.

Let’s compare FreedomPop’s most popular plan of unlimited text, talk, & 2GB of data, at the cost of $24.99 (after the free one-month trial!) to Verizon, AT&T and Sprint. For this same plan, Verizon charges you $40, AT&T charges you $50, and Sprint opts for a 3GB plan instead of two at $50. You might be saying, well FreedomPop must have spotty coverage or charge way too much to purchase a new phone—there’s got to be a catch. Well, you’d be wrong. FreedomPop gets their coverage through Sprint, so anywhere your Sprint phone works, will FreedomPop. And compared to Verizon, FreedomPop works just as well in inconsistent coverage areas like Maine. FreedomPop also offers a much more financially accessible phone purchase. The Moto E 2nd Gen LTE Android phone is just $29.99 compared to the hundreds you could spend on a phone elsewhere. FreedomPop’s 2GB plan is for someone who spends a good amount of time looking at their phone. If you’re a more casual phone user, FreedomPop can offer you a plan that’s free. Yes, free. You can get 200 minutes for talk, 500 texts, and 500MB of data each month at no cost to you.


When considering which phone plan to use, make sure to think about what you really need and make sure to choose a plan that doesn’t charge you for what you aren’t using.

Stick with budgeting tools and apps, even when they make you feel bad

You downloaded an app like Spending Tracker or finally linked up all your accounts with one of our recommending budgeting tools.

Feels good to take control of your finances, right?

Yes—for awhile.

Don’t be surprised if you start to feel depressed once you start actually entering numbers about purchases, or seeing—in those neat, colored Mint graphs—how far off your budget you went. “These tools have made it so simple and easy to track money,” Ryan says. “But knowledge can be painful. It’s unenjoyable to know you’re not doing well at something.” But stick with it, Ryan advises.


“It’s like exercise,” he says. “At first, it’s painful. But then you begin to enjoy it, or at least realize the uncomfortableness is worth it. Realizing you spend too much money isn’t fun, but the pain that comes with massive credit card debt is worse.” There’s also an easy way to save money similar to budgeting apps, but that does the work for you. Chances are you have a couple of subscriptions out there that you quickly signed up for, but forgot about haven’t had the chance to cancel. Maybe it’s your gym membership, or that freelance site you no longer need because you’re full-up on jobs.

Either way, Trim, a free financial service, will find and cancel these subscriptions for you. All you have to do is link your bank and credit card info to their service (don’t worry, they only load the transactions related to subscriptions). They then send you a text message with all your subscriptions (Netflix, Hulu, your gym, etc.) and you can cancel them by replying with “Cancel [insert subscriptions here].”

Don’t purchase upgrades

Retailers offer upgrades for almost everything these days. But in most cases, the upgrade isn’t worth the cost. “Think about a concert or a baseball game,” Ryan says. “Is there really a difference between nosebleeds and ten rows in front of the nosebleeds? Unless you’re paying for an upgrade that will get you behind the dugouts or in the tenth row, don’t buy the upgrade.”

Wait 24 hours to buy any unnecessary items

Avoid engaging in retail therapy.

“If you’re wandering through a mall aimlessly, and you’re feeling bad about your career or something else, and you see a shiny new phone, you might think, ‘That will make me happy,’” he says.

But studies show the joy that comes with a new purchase usually disappears. All you’re left with is the debt from these purchases, or less money to put in savings. The less money you have, the more stressed you’ll be.

But sometimes you do need a new phone, or new clothing. So when is it OK to make these purchases? When you take 24 hours to think it over.

“After 24 hours, you’re probably not making an emotional purchase,” Ryan says. “You either really want it, or you’ve decided the purchase will truly bring you closer to family and friends.”

When shopping or eating out, if the total is less than $100, use cash

The last time I visited an ATM was over two weeks ago, when I took out $100. It’s a pain for me to get to an ATM, especially in cold weather. Now that I can deposit checks through Chase’s mobile app, I have even less of a reason go to an actual bank.

I just checked my wallet, and I still have $80 there (my husband swiped $20).

Now I’ve certainly spent money since then—I just always pay with my debit card at stores and restaurants.

Even though I know I have cash in my wallet when I’m paying a bill, I’m reluctant to use it. I keep telling myself I may need it in the case of an emergency (although when I think about it, I’m not sure how cash would really help me) or if I go to a cash-only restaurant. But when I think about it, that’s ridiculous. I can just stop being so lazy and go to ATMs more.

According to Ryan, your brain will send out a lot of “don’t do it” signals when you know you only have cash in your pocket. “Research shows there’s pain in paying with cash,” he says. “You really understand how much you’re parting with when you use cash. You don’t have that same experience with plastic.”

You probably shouldn’t carry around loads of cash. After all, wallets are sometimes lost or stolen. But Ryan thinks carrying around $100, and using that to pay totals and tabs will pay off in the long run.


How To Get Out Of Debt On A Low Income / Chris Muller


You want to get out of debt, but you don't make a lot of money---how can you possibly get rid of debt once and for all? Here's some helpful advice.

Getting out of debt is hard enough when you have plenty of money coming in, let alone facing this challenge when you’re on a low income. But here’s the thing: it is possible to get out of debt on a low income. But wait: there’s more! It’s also possible to do it without selling major assets like the house or car you don’t yet have.

Today I’m going to go over strategies you can use to pull off this major feat.

Take stock of your financial situation

You can’t fix the debt that you don’t acknowledge you have, because one of the most important elements of any debt-reduction strategy is choosing which debt to tackle first. Sit down at a computer—or with an old-school paper spreadsheet if that’s your style—and write down all of your debts.

As you’re working, make sure you list the amount, the interest, the term, your monthly payments, and the available credit limit for each debt. This will help you understand the full breadth of the situation, and give you solid numbers to work with when you create a budget (spoiler alert).

And while you’re at it, make separate spreadsheets to list all of your other monthly expenses—things like food, utilities, car payments, etc.—plus one for all the money that you have coming in from various sources.

After that, you can make a budget using zero-sum budgeting techniques

Nobody likes making a budget. But trust me: this is the only way you’ll manage to get your debt under control.

Once you know all your expenses and debts, you can go through the process of allocating your monthly income as necessary. Holly Johnson is a personal finance blogger, and she once found herself buried under a mountain of debt. She used zero-sum budgeting to get out.

“Zero-sum budgeting gives you the tools to improve your finances by teaching you how to a) live off last month’s actual income instead of income projections, b) make actionable decisions regarding your money, and c) reduce waste,” she explains.

The idea behind zero-sum budgeting is that at the end of the month, you don’t have a single cent left over because every dollar has been allocated to bills, debts, and savings. This may sound a little unsettling, but it will help you regain control much faster. When you create your budget, the first things to take care of are savings and debts. Then you can use what’s left over for everything else. If you have to cut expenses somewhere, it comes from things like entertainment and transportation rather than debt-reduction or investments.

Look at your biggest expenses and see where you can trim fat

Once you know where you’re at regarding your debts, expenses, and budget, you must take steps to close the purse strings. You can’t get out of debt if your debt keeps growing. Because you can’t take that money from debt payments or savings, it’ll have to come from elsewhere.

Go over your budget and categorize your spending to see where you’re spending too much money—on transportation or eating out, for instance. Then make an expenditure reduction plan. Here are some ideas:

  • Buy food in bulk, especially when it’s on sale

  • Clip coupons for everything that you buy, from food to clothes to toiletries and more

  • Sell your car (if you have one) and walk or bike to work—if you’re like most people, you spend an average of $9,000 a year on your car

  • Cook more at home and eat out less

  • Cut your subscriptions for things like cable and the gym, and opt for lower service packages for necessary things like cell phones and internet

  • Bring your daily coffee from home rather than buying out

  • Always buy used: check thrift stores and classifieds when you need to buy anything, including clothes, furniture, vehicles, and even appliances

The only way to tackle your debt is to make more than the minimum payments

We’ve talked about budgets and spending and how to stop adding to your debts, but now it’s time to get to the nitty gritty details of debt reduction. The first and among the most important things to realize is this: Making just the minimum payment will result in life-long debt.

The average American has a credit card balance of about $9,600 with a 15% interest rate. Making the minimum payment each month would leave you paying off that debt for nearly 12 years! If you want to get out of debt, you must make higher-than- minimum payments.

The best way to approach debt is to tackle one balance at a time

Now I know it may not be possible for you to make above-minimum payments on every debt every month. And don’t worry—you don’t have to. But what you do have to do is choose one debt to pay down first. While you’re doing that, continue making minimum payments elsewhere.

For instance, say you have five debts with different balances. To make things easy, we’ll say the minimum on each is $100. You’d start by making the minimum on four of those debts, but pay, say, $200 (for a total of $600) each month toward one of the debts until it was paid off.

As soon as you take care of that first balance, you can do a happy dance and start to tackle the next debt. From there, pay the minimum each month on the remaining three, and pay $300 (so you’re still paying the same $600 amount) toward the singled-out debt.

The Harvard Business Review investigated different debt reduction approaches and found that this method can help you pay off debts up to 15% faster than if you just spread the $600 evenly among all the debts.

Choosing a balance to tackle, method one: The Avalanche (aka ladder)

Now comes the (slightly) trickier part: Deciding which debts to tackle in which order. The first option is known as the avalanche, and it entails paying the debt with the highest interest rate first.

Bruce McClary at the National Foundation for Credit Counseling uses a ladder analogy to describe this method. Start with the highest interest account, and when that’s gone, “move down a rung of the ladder and apply all your extra payments to the account with the next highest rate.”

The major benefit of this method is that you’ll not only pay down your debts, but you’ll also save more money in the long run, thanks to the interest you won’t pay.

Choosing a balance to tackle, method two: The Snowball

In the other camp are the people who advocate the snowball method. It’s called this because you start with the smallest debt and work your way to the biggest one, like a snowball gathering speed as it rolls down a hill.

Between a $500, a $200, and a $1,000 debt, you’d start with the $200 and finish with the $1,000. This is more a psychological approach to debt-reduction because the idea is to gain inspiration and momentum from your small initial successes.

The business mogul Dave Ramsey devised this strategy. While it’s a sound method, you may end up paying a lot more interest with this technique. However, if you have trouble staying motivated, the extra interest may be well worth it to get out of debt.

Steps to getting out of debt


1. Use a balance transfer credit card

If you are on a low income and you are trying to get out of debt, an excellent option is to get a balance transfer credit card. Here’s what happens: you move the balance of one credit card to a second new credit card, and this way you effectively pay off the outstanding balance.

And balance transfer credit cards have a huge benefit: they almost always in my experience come with a special type of promotion as an incentive for the bank to get your business. And during this period, you do not pay any interest rate at all and it’s an opportunity for you to save money on all that interest you would otherwise be paying on the lump sum you owe.

Discover it® Balance Transfer

The Discover it® Balance Transfer is by far a superb credit card for doing balance transfers, especially if you have good to excellent credit. Here’s what you’ll want to know: the card has an amazing See Terms introductory period on balance transfers. And then once the introductory period ends, the regular APR is See Terms. Discover it® Secured

If you have not-so-good credit, and or you’re new in the credit world, a great to consider is Discover it® Secured – which as a secured card, you have to make a payment of a refundable security deposit before the account can be opened.

So while on the one hand, it may not be completely logical to transfer a balance to the Discover it® Secured card, you will be having the opportunity to build credit so that is a win for this particular card. This card lets you build your credit first, to then next find a good balance transfer offer.

A nice benefit for the card is the 2% cash back at restaurants or gas stations on up to $1,000 in combined purchases each quarter, and 1% cash back on all other credit card purchases. Discover will even match the amount you’ve earned during your account’s first year.

2. Take a debt consolidation loan

Debt consolidation is ideal for smaller or moderate amounts of debt you may have that you are sure is going to take you more than 6 months to pay off.

Unfortunately, the tricky part of debt consolidation loans is that there’s no magic solution for making your debt disappear. There’s no magic wand!

The best news will be if you have a high credit score, and if you do, you can pretty easily get some pretty attractive rates. But if that’s not the case, and your credit score is lower, you will need to be super careful about diligently checking and comparing, and then comparing again interest rates.

The bottom line to remember: with debt consolidation loans, you have to religiously make your monthly payments each month and stay 100% committed to making some serious steps in being sure to live within your means.

Stay in touch with your creditors throughout the process

Believe it or not, creditors are people too, and they do have a sense of sympathy. If you find yourself in a situation where you’re in over your head or struggling, get on the phone and talk to your creditors.

According to Bruce McClary, “don’t wait until an account is about to be closed because you’ve had several months of late or missed payments. Tell the creditor you’d like to pay down your balance faster and want to know what services are available to help you manage your debt.”

The creditor may be able to reduce or eliminate your interest payments, at least temporarily. This is especially true if you’ve fallen on financial hardship recently, because of things like a job loss or medical emergency.

Switching to cash will help you reduce your spending

No matter which method you choose, cutting up your credit cards may help you to stay on track as you hack away at your debts. On average, people spend about 15% more on purchases when they use plastic.

Find an additional source of income to help you pay debts faster

An excellent way of dealing with debts is to increase the money you have to pay them off. This isn’t always a feasible option, but there are ways you can increase your income. Here are a few ideas to get the ball rolling:

  • Get a part-time job

  • Work more overtime

  • Sell some of your things

  • Rent out part of your house

  • Set your sights on and work toward getting a promotion

When you start to make a little extra income, every extra dollar must go toward your debts. That includes unexpected income like gifts, tax returns, bonuses, prizes, or any other money you come into.

Consider a balance transfer in some scenarios

A balance transfer can be a risky way to deal with debt, but there are some situations where it makes sound financial sense. One condition is that the offer must include a 0% interest rate for a fixed period of time. This could save you tons of interest.

Another condition is that the balance transfer fee is small, or ideally nil. Another caveat is that the interest rate after the introductory period must not be exorbitant.

But be aware that this method will work best if you have the means to pay down a substantial amount of the debt during the zero-interest period.

Finally, know what debt solutions to avoid

Being in debt is terrifying. It’s panic-inducing. It can make you question your goals and dreams for the future. Worst of all, it can inspire people to listen to the wrong people or make horrible choices.

There are many debt-reduction solutions out there available to people, but not all of them are created equal. Credit counseling is one such option because while it may seem like a perfect idea, having creditors reduce your debt can severely damage your credit score for many years.

Similarly, an option like debt consolidation, which takes all of your debts and rolls them into a single debt, seems great but can have terrible consequences, especially if you don’t address the root causes of the debt.

Summary --

Being in debt is always overwhelming, and especially when you’re trying to get out of it on a small income. But there is hope, it is possible to get out of debt.

The key to getting out of debt on a low income is making a strict and bare-bones budget, tackling one debt at a time diligently and persistently, and not giving up, no matter how hard it seems. After all, which would you rather: living sparsely for a few years or living in debt for a lifetime?

These 4 Easy Steps Will Teach You How To Budget (Finally)


Budgeting is stupid; it's so boring and most of us never stick with it. Let's change that. Learn an easy way to (not) budget in just minutes a month.

Old-school personal finance books tell you that if you just create a budget and stick to it, then—POOF!—all your money problems will be solved. But anybody who has ever tried budgeting knows it’s complete crap.

In fact, only one out of every three Americans creates a formal budget every month.

You know you should budget, but you also know you’re not really going to do it. Learning how to budget isn’t the problem, and here’s why:

And even if you write down every dollar you spend for 30 days (which, done manually, is a complete pain in the ass), you’re still human.

Over the past five-plus years, I’ve experimented a lot with budgets. I’ve set monthly budgets, annual budgets, and weekly budgets.

I’ve tracked my spending using paper and pencil, spreadsheets, and apps like And through this I’ve learned something:

Tracking spending manually is pointless  

I never keep up. And I’m a financial blogger—a total nerd about this stuff.

If I can’t do it, I don’t expect you to. Monthly budgets are useless because we underestimate our monthly expenses. There are some things you just have to pay for every month, such as housing, transportation, utilities, food, and debt payments.

Then there are things you pay for less than every month, like car repairs, home improvements, trips and vacations, holiday gifts, and insurance payments. For you, these less predictable expenses may only be 10% or so of your total spending. But for me (especially after becoming a homeowner) they’ve crept up to more like 30% (home repairs aren’t cheap). And here’s what this means. Accounting for, and “pre-spending,” every dollar you make can be a financial mistake.

If I take my annual take-home pay, divide it by 12, and proceed to spend that amount every month, I’m going to be in trouble when that unexpected car repair comes up, or it’s December and I have to do my holiday shopping. So what you need to do is stop obsessing over the detailed, track-every-penny budgets you’ve always been told were the solution and instead, you need to implement a simple spending plan.

What is a simple spending plan?

A simple spending plan is an easy way to budget that helps you save money, get out of debt, pay your bills on time, and still allows you the freedom to spend money on things you value – within reason of course.

Recently, a funny thing happened to me. I was in the doctor’s office waiting for my physical and I picked up an issue of Money Magazine and randomly turned to a page that actually recommended the same thing: stop budgeting!

As a way to reduce financial stress, the piece recommended to ease off budgeting, saying:

“Money (or its lack) is the nation’s most common source of stress, reports the American Psychological Association. Making a detailed budget — a widely advised fix — only makes things worse, says Cleveland financial planner Kenneth Robinson, based on a decade of work with clients; the problem is that people hate to think about where they’ll need to cut back.”

In other words, when money is tight, focusing on that fact day in and day out doesn’t do you much good. And the magazine’s fix for the problem is the same as mine: a simple spending plan.

You can set up and automatically track your simple spending plan with PocketSmith’s customizable budgeting tools. See our full PocketSmith review.

Step 1: Track your spending automatically

Forget about manually tracking every beer and burger. The goal is to set up a system that keeps track of all of your spending electronically without any additional work from you so that you can access it if and when you need to.

You can do this easily by using the single-card method. This is when you use just a single debit or credit card for all of your purchases—or as close to all of them as you can—and let technology do the tracking for you.

One of the best ways technology can help our wallets is by eliminating the need to use cash, and therefore, eliminating the need to keep track of our cash expenses. Now this is counterintuitive to what a lot of old-school financial gurus say about cash helping you spend less.

While that’s partly true, the fact is cash can also get lost and stolen. And, more importantly, cash is on the way out.

Electronic payments are here, like it or not, and the times you need cash (for anything) over a debit or credit card are fewer and fewer. But the best thing about using a credit or debit card is that you automatically have a record of all of your spending.

So should you use credit or debit?

The age-old question. If you have a tendency to buy things first and figure out how you can pay for them later, stick to a debit card. But if you’re comfortable with a credit line and only charging what you can pay back in full each month, credit cards are more useful than most debit cards for tagging and categorizing your purchases.

With most cards, you can also export your transactions to spreadsheet…which, for the nerds like me, is where the fun begins.

Learn more: Find the best credit cards, how to choose the best card for you, and how to use credit cards responsibly

If a single card isn’t for you, use a personal finance management tool.

As an alternative to the single-card method, there are personal finance management (PFM) tools. These applications link to your credit and debit cards, aggregate your transactions, and can even categorize them automatically.

You set spending limits, and they can send an email or text when you hit them. These apps are powerful and effective…if, of course, you remember to login occasionally and make sure the categories are right, and view your tallies.

But even if you don’t, that’s OK. The important thing is that data is there if you need it.

Use Budgeting Apps

When it comes to budgeting, technology is on your side. There are apps that can walk you through the process of setting up a budget, then track your progress. Instead of manually evaluating your spending to make sure you stay on track, an app can monitor your spending and deliver the information to you.

One of our favorite budgeting apps is MoneyPatrol, which connects to all your financial accounts to help you monitor your spending. Just set a goal for each budget category each month and MoneyPatrol does the rest. If you reach your limit in a certain area, you’ll get an alert. At the end of the month, you can review your spending and use the information as you’re setting next month’s budget.

Personal Capital is another great budgeting app to check out. This app is especially useful if you want to add investing to your financial strategy. As with MoneyPatrol, you’ll link your financial accounts to Personal Capital and wait for the app to start gathering data from the money you’re spending. But while you’re budgeting and managing your money, you can also take advantage of Personal Capital’s expert advice to build an investment portfolio.

Step 2: Know your monthly “nut”

Setting up a personal finance app or downloading all of your credit card transactions is great for historical analysis of where all of your money goes. Looking forward, however, this data is less important.

What you need to know are your fixed monthly expenses. Things like:

  • Your rent or mortgage

  • Utilities and insurance

  • Loan payments (student, auto, etc.)

  • Minimum credit card payments

  • Desired savings, investments, or additional debt payments*

That last one is important. It’s vital that you calculate how much you want to save, invest, or use to pay down debt first.

To find what’s left, do the following:

  • Total your fixed monthly expenses (your Nut).

  • Figure out your net (take-home) pay, per month.

  • Subtract your Nut from your take-home pay.

This is what’s left to spend, also called your spending allowance (discussed below). You can spend this on whatever: food, gas, beer, travel. 

Then there’s the issue of having NO leftover money.

What do you do then? OK. Deep breath.

If money is tight, it’s likely there won’t be much (or any) left to spend after you’ve laid out your necessary monthly expenses and what you hope to save. In the short-term, you can reduce–but not eliminate–your savings goals while at the same time trimming spending.

Forget about trying to trim your food budget by $25. Look at big places you can save, like:

Cutting little things gets you a little bit of money. Making big changes gets you a lot of money.

Step 3: Put your money on autopilot

I first read about putting my money on autopilot over 10 years ago in The Automatic Millionaire by David Bach. The entire book is devoted to setting up automated systems to manage and invest your money.

This does two glorious things:

  1. It eliminates worry. You stop wasting time thinking about stupid things like “Did I pay the electric bill this month?”

  2. It protects you from yourself. Automated finances make it harder for you to sabotage your money. No more late credit card payments (and the associated fees and damage to your credit score). No more skipped IRA contributions. And on and on.

The idea of automating your finances isn’t new. In fact, another writer who has taken the idea of automated finances to the next level is behavioral finance guru Ramit Sethi.

He lays out simple plans for automating your personal finances on both his blog, I Will Teach You To Be Rich, and in his book by the same name. He’s a vocal advocate of what so many other financial “experts” for some reason refuse to acknowledge.

Our generation doesn’t want people our parents’ age telling us to just “set up a budget” and “cut back on lattes”…the latter a direct jab at Bach, who trademarked the term “Latte Factor” to describe how a daily coffee habit can eat into long-term wealth. Instead, we want to be able to spend our money consciously, even when that includes things we want, like a latte.

And the key to that is automation.

Step 4: Spend the rest without worry using a spending allowance

The amount of money that you have left after your monthly expenses and savings is what I call your spending allowance. It’s how much you can spend this month (on whatever you want) without worrying.

Using whatever method you’ve set up for autopilot spend tracking, you can keep a simple eye on how much of your spending allowance you’ve used for this month. For example, by setting up a goal in Mint or using the single-card method for all of your day-to-day spending.

This is what I do: if my family’s spending allowance is $2,500 in a month, I can eye our credit card balance throughout the month. If it reaches $2,000 too far before the end of the month, for example, I know it’s time to ramp down the spending a bit.

Summary --

The amount of money that you have left after your monthly expenses and savings is what I call your spending allowance. It’s how much you can spend this month (on whatever you want) without worrying.

Using whatever method you’ve set up for autopilot spend tracking, you can keep a simple eye on how much of your spending allowance you’ve used for this month. For example, by setting up a goal in Mint or using the single-card method for all of your day-to-day spending.

This is what I do: if my family’s spending allowance is $2,500 in a month, I can eye our credit card balance throughout the month. If it reaches $2,000 too far before the end of the month, for example, I know it’s time to ramp down the spending a bit.


bottom of page