Simple Steps to Budget Better and Manage Credit With Confidence
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How can you create a budget that works for you?
All right, everybody, raise your hand if one of your promises to yourself in 2025 is that you're going to follow a budget. Hey, look at that, I see lots of hands in the air. Just kidding, I can't see you. But there are probably quite a few of you who've made that promise to yourself. Today, we're going to help you keep it, and we're going to make sure that your credit life doesn't get in the way.
The main caution to watch out for with credit cards is overspending. Credit cards can just be really tricky because it doesn't necessarily feel like real money. And other than the credit limit on the card, there's really nothing stopping us to keep swiping away to buy what we want.
Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles.
And I'm Kim Palmer.
Throughout this month, we're featuring several episodes to help you get the year started off on the right financial foot, if you will. It's your money in 2025. Kim, you've joined us today to talk about budgeting and credit. And when I say credit here, I mean the credit you use, like from a credit card, as well as your credit scores and credit reports.
Yes, these are two aspects of our financial lives that are so common, but they're also really frequently misunderstood. We are going to walk people through some of the basics of setting up a budget. We'll actually go a bit beyond the basics. And then we're going to have some tips and tricks for layering credit onto that budget.
And that's a really good way to think of it. Know your budget first, then you can figure out how to use credit, aka debt. Of course, we are aware that probably most of the audience already has some credit cards. So we're really going to get into how to use credit responsibly and make sure you're making it work for you, not against you.
Credit is something you really need to actively manage. And one excellent way to do that is... Budget. Budget, exactly. We're going to meld these two aspects together so listeners can really head into 2025 with a really solid financial foundation.
Kim, I always enjoy hearing how my fellow nerds put their advice into practice for themselves. I want to ask whether there's anything you do at the start of the year to help yourself along these lines. Any reviews you do of the previous year or mental exercises to figure out how you're going to budget and manage your own credit life for the coming year? Anything you'd like to share with the audience?
Yes, of course I do. I absolutely love doing spending reviews. So I do a big one at the end of every year, but I actually also do more frequent reviews. So every month I like to pull up my credit card statement, which is basically where it the bulk of my spending is. And then I just see what surprises me, what trends do I notice. Sometimes I'll even notice some mistakes or errors that I have to fix. Sometimes there's a big expense that I want to kind of dig into and figure out why something went up so much that month, like takeout, for example. And from there, I can also just make decisions about where I might want to scale back or shifts I want to make. Sometimes there are irregular expenses.
For example, right now, I'm going through a lot of deposits for summer camps, because now's the time to sign up.
Wow, so far in advance.
Oh, so far in advance. Yes, we have to, you know, get those spots now to make sure we're set for the summer. It means putting up a lot of deposits. So I'm noticing that and just helps to plan for that. And then I can realize, okay, this month is a lot because of these certain reasons, but I know that won't repeat next month. Now you have to tell me, I would love to hear what you do.
Well, I do something similar, but I'm maybe a little bit lazy and I try to automate this as much as I can. I use an app that gathers all parts of my finances in one place, things like my investments, my spending categories, my savings accounts, so that at the end of the year, I dig into that app and I review what I do with my money. I did that at the end of 2024 and I looked at different spending categories and I asked myself what spending I felt good about, what spending I did not feel so good about. And then I also asked myself what changes I wanted to make based on how I felt I spent my money and managed my investments and savings and all of that the year before.
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