How to Challenge Your Credit Card Spending
Last week I wrote about our new credit card spending challenge starting next month. The idea is to limit our family’s credit card spending for the entire month to $1,600 or less. We have 2 primary credit cards that we use to pay for recurring bills like city water, cells phones,and cable. In addition, we use both cards to buy things like groceries and entertainment.
Over the past 4 months, we have averaged around $2,507.43 between the two cards. Looking back for all of last year, our family averaged $2,601.00 per month in spending on our credit cards. So for over the past year, we have averaged between $2,500 to $2,600 per month in credit card transactions.
As mentioned above, for the new credit card spending challenge, we have set a goal to spend under $1,600 for both cards. Based on our spending from last year, that is about a $1,000 savings! This sounds crazy.
If we are able to hit our goal and keep the spending to this amount, then our savings would be an unbelievable $12,000 per year. I can’t believe our family has basically been wasting $12K per year on things that we don’t need.
That $12,000 in savings for last year could have created an additional $525 in 12 month forward dividend income. That kind of extra dividend income could certainly kick start our Money Sprout Index in a very big way.
Can Cutting out $1,000 per Month in Spending Be Done?
After looking at the numbers a little more closely, maybe we have over estimated our potential savings? After all, cutting out $1,000 per month in spending may be possible. But will the benefits be worth the potential sacrifice?
I say yes. We are not talking about starving or being able to buy food. We still have shelter (house) and clothes. We can still live a modest lifestyle.
Sure it will take some sacrifice but nothing our family cannot handle.
Staying Focused One Day at a Time
So how can we make sure we hit our target to stay under $1,600 in credit card spending next month? It’s simple, take it one day at a time. We need to spend about $50 on average per day or less to hit our goal. Now that doesn’t seem too difficult?
I plan to keep an eye on our spending every day through our Personal Capital account. I can’t say enough about how this tool helps us with everything from budgeting to investing and even keeps track of our net worth.
Anyways, slow and steady is how we plan to tackle our goals.
I think by setting a large goal like this, our family will become more accustomed to living well below our means – rather than at our means. Over the last several years we have basically lived at or just below our means. Keeping an extra $1,000 in our pockets at the end of each month is a great start in having more money to invest.
I am also excited about the possibility of becoming more of a hustler. In order to cut out an extra $1K in spending every month, we may need to find alternative ways to pay for things. Possibly cut a bill or service here or there. Change our lifestyles to rely less on material items and more on what is important to us – family and time.
Will we reach our spending goals next month? While it is not guaranteed, I certainly hope we come close. Regardless of the outcome, I am confident we will reduce our expenses one way or another. Hopefully this leads to bigger and better things in the future.
The path to financial independence is not only about creating sustainable income streams. It is just as important to keep your expenses to a minimum. The combination of lowering your expenses enough that your income streams can cover them each month.
Our family has not reached financial independence yet (not even close), but next months savings will accomplish 2 different things. We will reduce our overall spending while using the savings to invest in dividend paying stocks that increases our income.
Now the only question is – why didn’t we start this sooner?
Do you set aggressive goals to cut your spending? What tips can you provide to help motivate our readers to stick to their goals?