Finances

The Credit Card Float

It’s been a couple weeks since I posted last. Since then, I finally passed my last work test and I am now commissioned!! 4.5 years at my job have all been leading up to this. It’s a promotion and a great raise and I’m super excited it’s finally done!!

Now I get to relax some knowing I have job security for at least a year. Lots of things are changing at work and I’m interested to see how it all works out.

Last time I posted a blog I mentioned wanting to talk about the ‘credit card float’. So here it is!

I got my first ‘real’ credit card during my sophomore year of college. My dad had told me, “I didn’t need one.” So when I got one, it was kind of an act of rebellion. I didn’t know a lot about credit cards at the time but my now husband had told me credit cards weren’t inherently bad, and it was fine as long as you paid off the balance every month. My first credit card had a limit of $500, which was almost as much as I made in a month, but I paid it off every time I got paid. I’m not sure exactly when it started happening, but I got to the point that I was still paying it off every month but when I did, I would have nothing left in the bank after. Which makes it where you have to keep using the credit card for the upcoming month expenses. I didn’t know there was a name for it until I started reading about the You Need a Budget app. They have a blog where they talk about The Credit Card Float:

https://www.youneedabudget.com/are-you-riding-the-credit-card-float/

I was riding the credit card float and didn’t even know it! Per Dave Ramsey’s baby steps, you should only have $1,000 saved up until after you’ve paid off all your debts except the house. So I’ve been riding my account out at $1,000 for almost three years, not thinking about how if I lost my job, that would only cover what I spent on my credit card last month. That made me super nervous. That also meant that if I lost my job, I had less than one month of living expenses saved! In Dave Ramsey’s world, you stop using credit cards so the $1,000 would be a true emergency fund. For me, I still living with a small amount of debt every month. However, I’m not willing to stop using credit cards. Credit card points have paid for the hotel room of my last several vacations and I plan on using points for both of the vacations coming up this year.

Instead, after reading that article, plus all the things I talked about in last month’s blog post, I decided to increase my emergency fund to a much higher level. That way, if for some reason I did lose my job, the amount I have in savings would be a true emergency fund instead of covering last month’s expenses. My goal is $10,000. I didn’t add any money to my savings account in May while I was building up a bigger buffer to cover my expenses so I am still sitting at $1,600. I am hoping to have $6,400 saved up by year end and be up to $10,000 before this time next year. 🙌🏻 That amount is roughly 3 months of living expenses and should cover a lot of major expenses. Plus it gives me a lot of peace of mind to have that amount to fall back on even though I hope to never have to use it.

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