How We Use our the Cash System to Pay our Credit Cards

I talk often about “the card we pay off monthly” so I decided maybe I should talk about how we do that.

We have two credit cards: one that we have carried a balance on for over 4 years and one that had a balance for about 10 years, but we have paid off monthly for the last (about) 5 years.

My last post about how we budget was all about how we use Dave Ramsey’s envelope system and cash; so I get that using credit and paying cash doesn’t really reconcile. I’m going to explain to you how we do that. (PS the say we do it is part of why we can’t get out of debt faster.)

Each pay period, I go to the bank and take out however much cash we have budgeted for the next two weeks.  And then I proceed to charge everything. WHAT? It doesn’t make sense, I know, but let me explain.  We still aren’t disciplined enough to use credit exclusively, so right now, I physically take the cash out of the bank and then when I buy something out of that category, like gas or food, I take that amount of money out of the designated envelope and put it in a jar with a post-it note on it with the date the credit card bill is due.

Pretty complicated sounding, I know. But it keeps us from overspending too much.

Any time there is a shortfall in any category, we make that up with our credit card, hence the reason we can’t get out of debt. Instead of taking any leftover money at the end of the month and putting it towards debt, we are taking any leftover money and paying off the credit card that we pay off monthly.

We don’t budget enough money each month to actually cover many of our costs so we have to make up the difference using credit*; and because we aren’t gazelles we aren’t willing to sacrifice our lifestyle in order to get out of debt faster.  It is a vicious, never ending cycle, but one that is wholly created by us. (*This isn't intentional. We budget in good faith every month and then spend more money than we budgeted."

Clearly the way we budget and use credit is not the most efficient way, but it keeps us from getting too far out of control and has allowed us to slowly decrease our total debt load since we started budgeting this way in December of 2015, nine months ago.

By taking cash out, then putting it in a jar to use to pay a credit card bill, I’m drastically increasing my trips to the bank. I know it doesn’t make the most sense; but we are not responsible enough, yet, to solely use credit cards.  On the flip side we don’t want to throw away all the points we could be gaining if we used credit.  Although not the most practical way to budget, right now, it works for us.

Today, for example, I am heading to the bank to deposit $960 that we “collected” over the course of our last credit card billing dates.  The bill is due soon and I need the money to pay for it.  That is not the whole amount of the bill, but will definitely help towards paying it off.

In an ideal world, we would budget enough money to fund every budget category, every month and we would never exceed our budget. We are in debt so clearly this is not how we have operated in the past.  This one change has helped us to get more of a handle on our finances; and allows us to earn some credit card points without totally blowing our budget out of the water.