Credit Card: Cash Management Tool

(Warning: The following article is intended only for those that have disciplined spending and strong cash flow management skills)

I don’t know anyone that doesn’t experience some level of anxiety when they check their credit card balance.

So it might seem counterintuitive, perhaps even sadistic, for me to encourage you to use your credit card more, not less.

But step back and think about it: If you have successfully adopted an elastic lifestyle that ensures you are living below your means, then why not use it as a tool to see all of your spending activity?

Used this way, it can serve not only as a window into your spending, but it can also serve as an artificial  representation of your lifestyle if you also use it to pay utility bills, health insurance premiums, cable modem, and other bills you might have paid separately.

When you check your balance, these items will be included, leading you to feel that you are spending more on your lifestyle than you had thought.

This is good! It will make you pause and consider how much you have already spent in a given month and if you are on track or need to cut back.

Getting a statement with a bigger balance than you are used to seeing will serve as a way to represent your expenses as larger than they really are.

You will think about your credit card as used for discretionary purposes, but seeing a bigger balance than you are used to will cause you to see more of your spending in one place than you are used to seeing.

This takes advantage of a key behavioral finance tenet: People accept the same cost when that cost is broken down into smaller measurements.

$3 a day vs. $90 a month vs. $1,080 a year.

Go ahead and try it.

It’s likely that you will be more vigilant and aware of your total spending.

When your balance adds up faster than you are used to, even though you aren’t spending more, it’ll help you to be more discerning in your lifestyle choices.