|Window shopping in Luzern, CH-2010|
One of my methods of managing my household finance is by setting aside some of the monthly savings for sale season which occurs at least twice a year. The allocation is around 5-10% of the saving made in the monthly budget made here. This money allocation system is also a good way to save for vacation. So, when it's time to buy that vacation package, I might just need to add some amount of money that is not shockingly large. I usually start making a budget for shopping, vacation and other occasional purchases on the beginning of the year or end of last financial year, for example late December or early January.
If in some point of time I need to make some purchases out of the budget, I use also credit card. For me, credit card is an advance payment method of purchasing. For small purchases that can be covered from next month salary, I always pay before the due date, to avoid unnecessary Tawarruq margin fee (for Islamic bank credit card like interest in conventional bank). For bigger purchases, like buying electronics or furnitures, etc, I divide the total amount plus margin fee into a maximum of 6 month repayment, and diligently pay the rest amount each month. Using Islamic financing really helps in the budgeting. More about Islamic financing in another posting.
Most people use credit cards as 'money', and pay only the minimum due amount. This is not a smart move when you want to create a healthy household finance. Shop with this plastic money wisely. Plan how much you can pay each month in the next 6 months, for instance. Don't go farther than 12 months, except if your credit card companies offer you 0% interest for 24 months. Remember that paying credit card debt will reduce your monthly savings. So, pay it more than the minimum required amount but less than the total saving you set aside monthly. Remember further that credit cards are only used for consumptive goods, and not for buying essentials like house or car or plane (joking :p). The latter are more advantageous when you buy them with a bank loan scheme.
Yes, you can spend and save in the same time. Allocate some of your saving every month and spend it wisely. Use credit card when necessary and pay it on time. Don't give more money to the credit card company by stalling your debt repayment (sorry my fellow bankers ;).