Many people come to YNAB because they are living paycheck to paycheck. It’s a life full of overdraft fees, unknowns, and stress—lots of stress. There is no denying they are trapped in a cycle that is unsustainable. Also, they are miserable.
However, many of you think you are doing pretty well. You can’t remember the last time you paid an overdraft fee and you pay your credit card bill in full every month. You never pay interest! In fact, you are very proud of this fact. You pay the whole bill, in full, every month!
And it is you proud credit-card-in-full-payer that I want to be sure are paying attention today.
I hope you are sitting down.
OK. I’m just going to give it to you straight: When you pay your credit card bill, you are paying for food you ate a month ago. And if you have to use your card to pay for food you eat today — even if you pay it off in full at the end of the month — you are floating on your credit card. Effectively, you are living on next month’s income, which might even be a little bit worse than living paycheck to paycheck.
You are living on money that you haven’t earned yet.
Ask yourself, “Would everything be perfectly OK if I paid my credit card in full today?” If the answer is no, you are riding the float.
So what now? Simple. Go back to the Four Rules. You can turn it around. And it will feel great.
Disclaimer: Before you haters start to hate, I am not against credit cards. There is nothing inherently wrong with credit cards—just how people use them. If you reversed the order, earned the money first before you spent it, there wouldn’t be a problem.
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Until next time…