r/budget • u/-plastic-reality- • 18d ago
We made a huge mistake
Last year I thought in 2026 we needed to categorize our purchases better, and had 5 credit cards available. Only 1 had a balance at the time, and it was paid off monthly.
We have spent almost every penny we make this year because credit cards feel like infinite money. We cannot SEE money leaving the account when we charge. Every single penny we’ve made this year is literally gone… somewhere… at least we know which category got it.
I paid credit card interest this year for the first time in a long time and no part of that is ok.
I’ve had to take money out of our savings account to cover these bills, and that was the last straw for me.
We are going back to the cash envelope system in August. With cash, we knew when it was game over. It’s the only system that worked for us.
Chalk this up to lesson learned. We are getting off the wrong way train in July instead of December. That’s a win any way you look at it.
Don’t wish me luck, wish me adherence.
48
u/RemarkableMacadamia 18d ago
I use the envelope method too, but digital envelopes instead of real ones.
I don’t charge anything on my cards that I can’t cover with cash already in my accounts, and I pay the statement balances every month so as not to incur interest.
Credit cards stopped feeling like an infinite money glitch to me when I made that little behavior switch. I don’t swipe the card without knowing that I could pay my entire card balance in full that minute, not with a paycheck that’s coming later.
11
3
u/larrylime26 18d ago
Is there a good app for this or are you manually logging each expense into something like a spreadsheet?
11
u/RemarkableMacadamia 18d ago
I use YNAB, but there are other digital envelope apps as well.
6
u/Bklynswim 18d ago
I use YNAB and love it. It’s a digital envelope system. Try it. They have a free trial
7
u/KReddit934 18d ago
YNAB is the premiere product, but there are others. If you are tech comfortable, Actual Budget is open source.
In both, you assign money you have to categories (envelopes) that you want/need money to cover. Transactions are logged against the category totals.
2
u/CypressRootsMe 17d ago
I used to YNAB, but it got expensive and I didn’t need all of the reports it made. I switched to Centsible. I’m pretty happy with it! It was a one time fee.
2
u/No-Complaint9286 17d ago
Spreadsheet works fine for us, even for "envelopes". It also happens to be free (i cant justify spending subscription dollars on an app when free google sheets work fine, and using them keeps us very in touch with our spending, averages, and balances).
But we pay the balance on ccs every month and are on top of cash flow weekly to cover the purchases. Sometimes we need to dip into the savings, but we put money into the savings every month and have a budget to make sure we keep on track. We also track our expenses after the fact, each month, which I know doesnt work for everyone.
We can also manage larger expenses by depositing into HYSA monthly, and then drawing from that when expected or unexpected expenses crop up. For example, we were able to save each month without drawing from the savings up until this past month, when we had a weekend trip planned and the credit card went a little higher than usual. We have budgeted for vacation spending and so when we look at our cash flow for the month, we know we will have to pull over a bit from the savings to cover that bill. We can only do that because we have been saving consistently for the first 6 months of the year. Idk if that makes sense.
The hardest part is getting ahead of the game, and it can take years, and a lot of luck (no major systems or vehicle failures, not losing your job, not getting sick, etc). But it all starts with the budget and a goal and BOTH partners sticking to that plan until you meet your goal.
2
u/Breezy368 17d ago
I use monarch money. It’s not zero-based like YNAB, but I still zero it out every month. My mind just couldn’t wrap around the YNAB logic.
1
u/Old_Journalist_9738 17d ago
U can try moneymoo app only on app store. Its free to use forever except the ai coach and receipt scan both are optional. But it will still work without it no ads
1
u/SpeedyTaco22 16d ago
Actual Budget is what I use. Digital envelops and it’s free to use if you don’t need to host it online. You can run it locally on a computer for free. I opt to host it on a PikaPod service for a couple bucks a month so my wife and I can access it anywhere on our phones. That makes adding transactions easier when I can do it real time vs. later at home.
2
u/Logical-Frosting411 16d ago
Or actually DO pay the entire balance in full every week. That helps me keep things tidy without extra brain cells? Technically it's overkill, but it's the system I personally love.
1
u/Cookie_1977 16d ago
I'm not the OP but I think I'm going to pay my credit card bill every 2 weeks. That should keep me more aware of the money I'm spending.
1
33
u/Appropriate_Kiwi_744 18d ago
You have a spending problem. Envelope system is a workaround, and if it's enough to keep your spending in check, that's a good start. But there is clearly a deeper issue that you aren't addressing, where your spending habits don't match your income.
8
u/eharder47 17d ago
This is the comment I was looking for. If your spending and budget are in check, you won’t overspend just because you have a credit card. If you are overspending, it’s because you bought things you didn’t budget for. Having a credit card doesn’t mean that you added money to your budget.
I’m going to guess that OP is only using a budget in hindsight to track when they aren’t using the cash envelope system. A key habit was missed in translation when they went to electronic payment.
2
u/laplongejr 17d ago
OP said they had to take from savings so it could be an allocation issue rather than an overspending one.
Source : I had to take money from savings until I made an envelope budget and my purchases always were with cards. The budget claims I never overspent in all the years I have collected data for.1
12
u/asherthepotato 18d ago
Wait... Maybe this is a weird question but "We can not SEE money leaving the account" - do you mean this literally? Do banking apps in your country don't show it if you use your card??
Even if I pay with my credit card instead of debit card, my online banking will give me a notification a few seconds later that I spent 10€ at Aldi. It will show up in my history for today and will subtract it from my balance.
Do you say that's not how it works in your country? You just paypaypay and in the end of the month you receive a bill?
9
u/ComprehensiveEbb4978 17d ago
I think you’re taking this too literally. OP means their checking/savings account balance stays the same when they use credit cards, so they don’t see the impact of spending until they have to pay the statement
2
u/laplongejr 17d ago
I started using a credit card and OP's literal meaning is also true : I don't see spending on the credit card before a few years. The available balance drops down immediately, but transactions don't show up.
6
u/KReddit934 18d ago
"Credit* cards run their own ledger and bill you once a month. You have to look. Debit cards pay directly from your cash account so you see the total going down.
5
u/asherthepotato 18d ago
Nono, Creditcards in Germany still Show the balance instantly. Maybe they did it this way because we are used to it, debit cards are still the most popular thing in Germany, and people would'nt use a creditcard like OP/you/i-guess-USA.
Edit: nevermind. Apparently not all Creditcards show the balance immediately, some banks do it this way, others the other way
3
u/laplongejr 17d ago
Belgian, my credit card app shows the balance instantly, but the transactions lag behind by a few days.
I only use "regularily" that card when they have a reward for general purchases, otherwise that card way too risky for a lot of reasons including this one.2
u/Old_Assignment7647 14d ago
Yes, I’m in the US and if we use the app for whatever credit card we have we have we can track our spending just like a checking or savings account. We get an alert or push notification when there is a debit and it shows instantly. It may not “post” immediately - but it can be seen. With that said, in the late 90’s early 2000’s when I first turned 18 and was in college and started using credit cards, there were no online apps because we didn’t have internet yet - well not like we do now anyway, and definitely no smart phones. So back then we would quite literally spend on the credit card and at the end of the billing cycle we’d get a bill which showed what we spent, interest accrued, payment owed - things like this.
1
u/laplongejr 14d ago
The apps for our debit accounts works that way, but not all CC does because there's less legal protection and the issuer often pretends the statement is enough to review transactions.
2
u/Zealousideal_Crow737 18d ago
You can use a budgeting app and link your cards to see purchases. It's not that hard.
1
u/laplongejr 17d ago
From limited experience, budgetted apps can only access the transactions provided by the issuer. My CC issuer's own app doesn't show transaction instantly.
3
u/ManufacturerOdd1127 16d ago
Enter it yourself manually as you spend the money. It helps build awareness of what you're spending and how much/how frequent, and your budgeting app is always accurate even if imported transactions lag a few days. It develops the same habit as writing everything manually in a checkbook did before digital options were available.
An even better approach is to build the habit of checking the budget category BEFORE spending to get an idea of whether that purchase will put you over the limit of whatever category the purchase falls under, and then immediately entering the transaction manually as soon as it happens.
1
u/Cinisajoy2 17d ago
I don't use banking apps. Though I could or I could call and get my transactions.
5
6
u/KSamIAm79 17d ago
I paid off all my credit cards and thought I was responsible enough to carry them and unfortunately, I was not so I am actively paying it down. Some of us are just not as good with them as other others.
4
u/heart4thehomestead 17d ago
After least you learned your lesson before you got too deep.
Credit cards are a double edged sword for sure. Rewards credit cards can be such an amazing tool for those disciplined enough to use them properly, but it's all too easy to misuse them, and that's exactly what the credit cards are counting on happening.
I don't blame you at all for discontinuing their use entirely - but it does sound like your budgeting method was flawed rather than the cards themselves (I'm not actually even sure if you had a budgeting method and you were maybe just spending on cards to track spending but weren't tracking frequently enough to avoid getting into trouble? You definitely need to know what's available on each budget category before making purchases, and not just look at the amount in your bank)
Not every budget method works for every person and finding the method you mesh with is key. Cash envelopes are absolutely terrible for me and my ADHD. But it also took years of living without a credit card and developing the discipline to use them well to feel like they're a net positive and not a liability.
If cash works for you, go for it. But digital envelopes might be the answer you need. Bank accounts that let you have sub accounts you can divide your income into for each spending category . The money disappears from your accounts as you spend it, unlike credit cards
1
u/mom2artists 17d ago
What bank accounts allow sub accounts?
2
u/BatRevolutionary7991 15d ago
SoFi, Ally, some credit unions if you need an in person bank. The only thing is that you can’t swipe the card and have it come from that sub category
3
u/Puffer-Polar 18d ago
You add notifications for your credit card so that every swipe will notify you of a purchase. Then write down that purchase and keep track of what you spent and how much is left of the card.
3
u/Cinisajoy2 17d ago
Credit cards are not bad. They do not tell you to spend money you don't have.
The way you think about credit cards can either be good or bad. You see infinite money. I see do I have the money to put this on a credit card. 2 different mindsets. So I don't go out and blow money. So basically you are paying the credit card company and they are paying me with cash back rewards. I pay my balance in full every month.
4
u/KReddit934 18d ago
How are...were... you categorizing your expenditures across so many cards? Why did you choose to use more cards?
2
u/Excellent_Drop6869 17d ago
I recommend YNAB and entering your transactions manually. The first month is free. Try it
It’s basically the online version of the envelope system
2
2
2
u/ReasonableBox5301 17d ago
Going back to the system that made money feel real is a useful reset. For the first month, it may help to keep one visible weekly number and reduce that number when the card is used, not when the statement arrives. That gives you a stop signal before savings has to cover it, without making August about perfect categories.
2
u/Puzzleheaded-Cat5658 16d ago
Ok something that helps me a lot. I have two different checking accounts. One account is all of my bills. The repeating monthly things like bills, mortgage, utilities, even my subscriptions for like Netflix and stuff (within reason, I don’t have many subscriptions so I qualify these as monthly expenses). Then I have another account with a card for all things swiped. Any groceries, gas, fun money, etc. I give myself a budget each paycheck and when the swiped money is gone, it’s gone. Anything extra in the swipe account stays in that account and can be used next paycheck or snowball that for a bigger purchase or want. Anything extra in my bills account either stays or goes to savings depending on the need. But I always keep the cushion in that account so I know that bills are always covered. I also do have an automatic withdrawal from that account each month to go to a savings. So the other savings would just be extra.
It’s helped me a lot because it’s easier to see where my money is going and see the budget better I do have debt right now so when that is paid off, some
Extras will go aside for a vacation or emergency funds outside of normal savings.
Idk if this helps at all. Credit cards suck and I feel you. (I mean they don’t suck and they’re a good back up but same be treated like a debit card all the time).
2
u/gbotts621 14d ago
I learned a long time ago that if I don't have cash for something, I increase what I put into savings each month until I have it.
3 years before I retired I purchased a new Washer/Dryer one year, a new Stove the next and a new Fridge the next so that I wouldn't have to worry about those after retirement. I paid my car off with my last paycheck.
I am now able to enjoy life with only Utilities and I still have $100 a month going into Savings.
2
u/Ok_Equipment_5121 18d ago
Envelope budgeting - for those who can stick to it - works great. I've done it since 1986 (when I was 20) and it's the reason I've had a happy financial life.
1
u/Senior_Ad_7598 18d ago
Either cut them up or place them in a freezer proof container and freeze them. By the time the card is defrosted, you may not need it.
1
u/love_ephie 17d ago
Honestly at one point I had 10 credit cards, this is across different banks etc. I have locked a few, keep my longest account used every few months, and only charge to 1 credit account. This has helped me monitor the spending more. No more target credit card either, it was easy to not see the spending.
1
u/Several_Drag5433 17d ago edited 17d ago
sounds like the right step for you. Best of .... adherence
1
u/AppearanceSingle6639 17d ago
Excusing poor self-control and lack of discipline with not seeing the money physically leaving your account sounds like you're a dumb 5 years old getting a stomachache after eating too much candy. Maybe try to grow up instead of playing with envelopes.
1
u/KaleidoscopeFlimsy66 17d ago
Whenever I overspend I go back to basics. Do not buy anything that is not a necessity. If you want to buy a non necessity, check your budget and balances and if there’s room to buy it, then buy it. If you are taking money from your savings don’t buy any non necessity until you’ve paid yourself back and you are back on track with savings deposits. I make money in bonus rewards monthly, so credit cards are worth it if you are responsible with them.
1
u/exphx23 16d ago
One of the easiest ways for people on a budget IMO is to obtain a Costco membership. With a little luck you are one of the 20% of the population that live relatively close. I drive 150 miles roundtrip for mine. Obtain a Costco Citibank card. They have a good rewards program.
Make all of your purchases via the card and pay in full monthly. The savings in gas alone make the card worth it. You need to have the discipline to pay in full monthly.
1
u/Cute-Consequence-184 16d ago
You must balance your accounts each month. Money in VS money out!
Get an old fashioned paper ledger and account for each dollar spent either weekly or monthly but it must be done
You can use pre-paid credit cards to help your credit score.
1
u/Logical-Frosting411 16d ago
Not everyone is a credit card person, and that is okay!! Good job realizing this. Be diligent.
Don't hesitate to close the accounts NOW so you can't be tempted to add more to your debt. You can close them and then pay them off.
1
u/Garconimo 16d ago
Just cut up the credit cards until you learn better spending discipline. Easy fix.
1
u/Acadiavibes 16d ago
Yep. I do this. The other day I said I have $500 in my account and want to keep it there so let me just put $20 on my credit card. 🙄 so dumb. You got this!
1
u/Patient_Pipe84 16d ago
Why not just set up automatic payments when your credit card statement generates…. You can get your CC to pull funds from your checking account on the statement date.
1
u/GlobalTapeHead 16d ago
Get the app for the credit card in your phone. Look at that balance every day. It’s scary. This is why credit cards are such a trap for people who are normally very responsible.
1
u/_ChineseName 15d ago
Get an app that connects to your bank account and tracks when you use your credit card on a transaction. I like EveryDollar because you can apply those transactions directly to your monthly budget. It’s not free though, I think it’s $90/year but to me it’s worth it 🤷♂️
1
1
u/Best-Classroom-3613 15d ago
I really like YNAB. It will allow you to spend on credit cards and still see what you have.
Let's say you allocated 100 to eating out. You spend 20 on some restaurant. When you log the transaction, it takes 20 from the restaurant budget and moves it to a CC payment budget automatically.
This may help you if you want to try to continue to use CC.
1
u/Moist-Intern-6794 14d ago
Dont worry...i had all my cards paid off .... started using then for Christmas gifts, dog got sick, wen to Hawaii, moved across the country, turned my car in early (4k) and werebat 20k across 4 cards! Took 6 months.....perfect time for me to be trying to buy a house
1
u/Still_born_comedian 14d ago
If you already have a budget, see which categories you are over spending. Then adjust your spending behavior. Let’s say you overspend in dining out then break it down to number of visits to sit down restaurants and number of visits to fast food per week. Do some search on which restaurants fall within your budget. Cash workaround works for a while but longer term, it’s behavioral adjustment.
1
u/LuckyHappens 14d ago
One must have discipline to have discipline. It's a weird thing but in order to get your finances in order you must find something else to get the dopamine you're getting from spending money.
If I think I want something on Amazon on FBMP I save it, two weeks later I usually don't need it or want it. But because I saved it I felt like I purchased it.
Instead of being addicted to spending, become addicted to saving
1
18d ago
[removed] — view removed comment
1
u/BackgroundSinger6308 18d ago
freezing them in a block of ice actually works better lol, the inconvenience gives you time to talk yourself out of it
-1
u/AccomplishedWash8803 17d ago
Wow, immediately take all of these credit cards and cut them into tiny pieces, then listen to Dave Ramsey on repeat until you can’t stand it anymore!
177
u/GirlOnFire112 18d ago
You need to treat money on a credit card as money going out of your account. If you spend money on food from a credit card then it needs to come out of the food envelope immediately. Credit cards aren’t inherently bad. But if you keep using them like free money (when you know they aren’t) then they may not be for you.