17 May How can I control my credit card spending?

Q. I have a tendency to overspend every month on credit cards, and I either take from savings or a home equity line to pay them off. How can I better control my spending?
— Still working

A. Your problem is one faced by many regular users of credit cards.

The first step to fixing a problem is admitting you have one, so good for you.

Credit cards are popular in part because they feel like you’re spending free money, said Jeanne Kane, a financial planner with JFL Total Wealth Management in Boonton.

“Credit cards provide easy access to credit, which makes it very easy to overspend,” she said. “The key to being financially independent is spending less than you make.”

Here are some ways to do it.

Begin by looking at where your money is going, Kane said. She said it’s hard to change when you don’t know what to change.

“Start with understanding your big expenses such as your mortgage and work your way down to your daily trip to the coffee shop,” she said. “Those small expenses can really add up. The cost of a $4 cup of coffee each day works out to over $1,000 a year.”

The next step is to set a budget.

She said you should break your spending down into needs and wants.

“Your needs are expenses that you have to pay such as your car payment or your rent,” she said. “Your wants would include going out to dinner or go on vacation.”

Take what you have to spend each month and put it towards the needs first, Kane said. Whatever is left over, put towards your wants.

Don’t forget to set money aside for savings, she said.

Next, rethink the role of credit cards.

“Only use your credit cards when you know that you can pay off the balance,” she said.

Or better yet, she said, out of sight out of mind. Take a Ziploc bag and put your credit cards in it. Fill it with water and put it in your freezer. That way you won’t be tempted with the credit cards in your wallet. If you really need to use a credit card, it’s there, but the inconvenience will make you think twice about using it.

Remember that cash is king. You can’t spend what you don’t have, Kane said. Pay yourself a cash allowance each week. You can touch, feel, and see cash which makes it easier to see when you’re running low.

Then have a backstop.

“Set up a separate account for your areas you regularly overspend,” Kane said. “If you know that you tend to overspend at the grocery store, set aside money in a separate account to be used only for groceries. That way you only have access to the budgeted amount, not your entire savings.”

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This story was originally published on May 17, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.