When new adults and young college students are looking to establish themselves in “the real world”, they oftentimes do so by beginning to build their credit and opening up credit cards. However, simply having a credit card is not enough to establish yourself, you need to actually use it.
Oftentimes, these new credit card users are nervous to process purchases for fear of going overboard on their spending, and not being able to pay off their cards at the end of the month. That’s why some tend to set monthly minimums for themselves, in an attempt to learn how to budget their lifestyle while still building credit for their futures.
Many students break down their budgets by category based on what is necessary and essential and what is not essential, or “needs” and “wants”.
One example of a budgeting category is food. While eating out is a lot more convenient than cooking something to eat at home, grocery shopping and preparing your own meals is significantly less expensive, and the cost of eating out adds up. If you eat out for one meal a day, at an average of ten dollars per meal, you’re spending around seventy dollars a week which translates to nearly three hundred dollars a month, and that’s just on one meal out per day. If you add that to a hundred dollar grocery trip every two weeks, that means you’re spending around five hundred dollars a month on your meals.
Instead of this, you can set a weekly minimum of how many days you’ll eat at home instead of dining out, and use going to a restaurant as a way to treat yourself once or twice a week. If you cut down going out to eat to twice a week, you’re spending twenty dollars per week and eighty per month on that expense, which adds up to two hundred and eighty dollars monthly on food expenses, cutting your spending in nearly half.
Other examples of necessary budgeting categories are living expenses (such as rent), and transportation (gas and insurance, ride sharing services, or a public transportation pass).
Some examples of “wants” are things like going out on the weekends or buying drinks, going shopping, or services such as Netflix, BirchBox, or Ipsy, which are monthly subscriptions that automatically process payments on your credit card with a set amount each month (usually around ten dollars per service).
In order to both budget in an effective way and to build credit without overdoing it on their spending, some new credit card users try to keep their credit card use to a minimum. They will only use it in emergencies, or for set expenses that stay the same, such as their rent or their monthly subscription services, which means that the charges being processed on the card monthly remain the same, allowing you to keep your spending in check and ensuring you’re always able to pay off your card at the end of the month..