Hi Reader!

Do you put most of your purchases on your credit card and pay them off at the end of the month? While that’s a great money habit, you may be carrying more risk than you realize.

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Here's a question: Do you charge purchases today knowing you'll pay them off with your next paycheck? It feels harmless enough, right?

That's called credit card float. And while it can feel as breezy as a lazy river ride, it may be hiding some murky waters beneath the surface.

When you pay for something today but need tomorrow's paycheck to cover it, you’re in debt. If that next income doesn’t arrive as expected (a delayed paycheck, a slow month, an unexpected expense), you'll have to dip into savings. Suddenly, your emergency fund is not as big a buffer as you thought because you are quietly covering last month's spending.

Here's how to get off the float:

• Make a spending plan based only on the money you have right now.
• Assign every dollar to a spending category or envelope. This can be simple categories - specifying just wants and needs, or more specific, like food, house expenses, fun, travel, etc.
• When you charge something to your card, make sure you can cover it with money already set aside in that expense’s category.
• Move that amount into a "pay off credit card" category/envelope, so it's ready when the bill comes due.

By doing this, you treat your credit card like a debit card — you only spend money you already have. That way, you still get the perks (points and miles are great!) without the risk of hidden debt.

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Want to talk through how to set up a system like this for your own finances? Schedule a FREE Penny for Your Thoughts Q&A Call​

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Remember, small change adds up. Step by step and penny by penny, we’re building a better life. Have a shiny day!

Laura

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