Over the course of human existence, we have moved from a simple barter system to using currency for our transactions. Originally, our currency took the form of coins, and later, the form of bills. The next stage in our money evolution was the use of credit cards.

Credit and debit cards have greatly increased the convenience in our lives. We now live in a world where you can spend money without carrying around any cash, and buy items and services with just the tap or the swipe of a card. You don’t need to temper your purchases with the amount of cash in your wallet, or even know how much money you have in your bank account before making a purchase.

Thanks to that convenience, coupled with easy access to credit, people are becoming used to operating without a personal budget. In turn, this has greatly increased the risk of overextending oneself. For this reason, renowned financial literacy speaker and author Dave Ramsey advises everyone with a credit card to cut it up immediately.

It is Mr. Ramsey’s firm belief that there is nothing you can do with a credit card that you can’t also do with a debit card. The points and other rewards are just an incentive to sign up for a risky product you don’t need. Personally, I’m not quite at Dave’s level yet, but I do see the wisdom in his advice. Even when you pay off your balance at the end of every month, you are still using money this month that you won’t earn until next month.

The overall effect is that you’re a little like a dog chasing its own tail. Every time you think you’re caught up, there is a new charge to the card. This is manageable if you’re disciplined in your spending, never going further than what you can pay off the next month. For most people though, the available credit on your account is far greater than what you can afford to repay.

So, if you’re not ready to give up your credit card, then I propose a compromise. Determine your monthly budget and the expenses you typically spend on your credit card monthly. At the start of the month, transfer this amount from your bank account to your credit card account. Now you must force yourself to ignore the credit available in your account and only use the money you transferred.

Under no circumstance should you go over the amount you transferred. If you want to make a larger purchase that falls outside your normal monthly budget, then first transfer the funds over to your credit card. This way, you retain the convenience of the credit card and the rewards, without spending money you don’t have.

This approach takes more discipline than Dave Ramsey’s, but is definitely doable. Go to our Facebook page and leave a comment to let us know what tactics you use to stay on budget.

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