I used to cringe when my credit card statement arrived in the mail. And, actually, not because we carry a huge balance. We pay off our balance every month. Still, there would always be a couple of purchases I had forgotten about, and they would totally throw off my monthly budget.
I admit that I’m a bit anal about our monthly family budget. My friends and family know this and tease me about it. But I can’t help it. It’s in my genes. My dad was a tax preparer and math nut. It’s a built-in idiosyncrasy in my family!
So a couple of months ago, I figured out a solution in Quicken, my financial computer program of choice. (You’ll hear about my beloved Quicken often if you follow this blog, just to warn ya.)
What I do is this: I keep track of my credit card purchases in Quicken as we make them. And I have the program deduct them from the appropriate categories (Groceries, Dining Out, etc.) in our monthly budget as we go along. That way, when our credit card statement appears, I’ve already subtracted every plastic purchase from our monthly budget. No surprises! (Well, OK, fewer surprises. I still forget to record receipts from time to time.)
Like most stuff with Quicken, this whole process actually takes 10 times longer to explain than to actually DO, so don’t freak out on me. Give it a try. It can really reduce your financial stress. Here’s how I set up my credit card account and started tracking my transactions on the fly:
Let me use our gas category as an example. We budget about $250 each month for gas for our two cars. After writing this story for Reader’s Digest on the danger of debit cards, I vowed to always pay for gas with either cash or a credit card. (Big chance of debit card fraud at gas stations, folks.)
But by the end of each month, I wasn’t sure if we had really spent just $200 on gas or significantly more. I wouldn’t know until my credit card statement came—unless I wanted to add up all our gas receipts. (Not.) And I really wanted to know what we were spending on gas so I could set aside the right amount in our Quicken “Car: Gas” category for the next month. (Again, that budgetary gene at work.)
In Quicken, the solution was easy:
• I created a new, separate “Credit Card” account and enabled it for online banking. I followed these instructions for Quicken 2007 for Mac. (Click on the instructions to enlarge them.)
• I enabled online banking for this account so I could download transactions from my card issuer’s Web site (Citicard, in my case). But since I don’t have that many receipts, I often just enter them by hand. Anyhoo, my Citicard account now looks just like a separate checking account register in my program.
• After I paid my current Citicard bill, I started entering my credit card receipts into the new Citicard register (not my Household Checking register) in Quicken within a day or two of the purchases. I keep track of every penny we spend in “categories” like Groceries, Mortgage, Dining Out, Entertainment, Car: Gas, and so on. So every credit card purchase also has a category designation. See the screen shot of my register, above.
• Now here’s the important part: How do I know how much I’ve spent on gas for the cars, IN TOTAL, so far this month? Every few days, or at least once a week, I look at a Quicken Budget Report.
I’m not going to go into full detail on how to set up a Budget and a Budget Reports, because you can read about that in your Quicken User Guide. But after you’ve filled in a Budget, here’s where to go for the report. It’s basically a “here’s where we are on our spending so far this month” report.
In Quicken for Mac (might be slightly different on your PC), go to Activities Menu ? Reports & Graphs ? Reports ? mine is called a “Budget Summary Report”. I set the date range for the current month (i.e. 8/1/08 to 8/31/08). I look at my “Car: Gas” category, and every purchase I’ve made – including the ones I entered in my Citicard credit card register—are noted here.
Even though I haven’t actually PAID the credit card bill (so I haven’t actually removed that money from my checking account yet), I have already subtracted those gas purchases from my monthly budget. Because, technically, that money is no longer available to me. I’ve already “spent” it. Does that make sense?
• Finally, one little trick when you pay your credit card bill, now that you have a separate credit card register:
You’re going to pay the bill from your Household Checking account. But in the “Category” section of this payment, choose your Credit Card Account (in my case, again, the account is called “Citicard Credit Card”). From your Category pulldown menu, your credit card account title will be in brackets. See mine, here (Again, click to enlarge it. It’s tough to see):
You’re just TRANSFERRING money from your checking account to pay off the “debt” you see listed in your credit card register. Since I pay off our credit card account every month, when I open my Citicard register in Quicken there will be a “deposit” automatically entered (the transfer of payment from my Household Checking account). And the credit card account balance will now be “0.”
Again, a long-winded explanation of how I stopped being surprised by my credit card balances.
Next step: Eliminating credit card purchases as much as possible!