Just a quick disclaimer: I know that 98% of this is all common sense, but I think sometimes we want so badly for things to be easier that we actually end up creating more problems for ourselves. At its heart, this is about my attempt to give myself a little more work in order to have fewer headaches down the road.
Have you ever asked yourself where is my money going? I don’t know many people who haven’t. I think part of my own money mystery had to do with auto draft. Don’t get me wrong, I love online banking and auto draft. Being able to have the bank automatically transfer money and send out bills saves time and a little bit of money on envelopes and stamps. Its a great system.
What I learned though was that someone like me who doesn’t have the best grasp on their finances really needs to not just set it and forget it. Even though I was aware that bills needed to be paid, I was still over and over again deceived by whatever my current bank balance was. I kept ending up short on money or worse in over draft. What was so confusing to me is that I don’t buy anything extravagant, sure I probably spend a little too much on Dunkin Donuts coffee, but even my coffee is always plain black iced coffee. Nothing extravagant again. I think I would be fine and then two days later I would look at my account and see that another $500 in bills had come out that I had forgotten about. I was trying to figure out how to get out of over draft and the crazy fees that were causing a huge dent in my budget. I needed to find away to stop forgetting about these bills and realize that looking at my bank account (as crazy as this sounds) does not give me an accurate picture of how much money I have.
Since January I have let go of auto draft on every but a couple smaller things like Netflix and my razor subscription ($6 every other month). I made a list of the dates of all my bills and how much the minimum payment is. (I always try to pay more than the minimum. I figure if I can put enough extra on say my student loans, then at the end of a year I will have made at least one extra payment. If you haven’t done the math on this it will seriously save you a bundle on interest and you’ll pay off your loan earlier.) I set an alarm every week for a time that I felt would be a good time that week to go and pay bills. I know this may seem like a lot more work, and it definitely is more work than not doing anything like I used to, but hear me out. I would pay all my bills that were due in the upcoming week and pay them. I would also make sure that nothing was due within the day or two of the next day I was going to sit down and pay the next weeks bills. If I didn’t have the money to pay right then, but was getting paid before my next paycheck came in, I would set another alarm to come back and pay bills as soon as my check was deposited. Adding in this extra 10-15 minutes helped to save me and get me on the right path.
I also downloaded an app called Chronicle. You may see this as unnecessary and there are definitely free ways to do the same thing. For me it was worth the minimal amount to have a very visual representation of what is due next how much I owe and when specifically it is due. I think it is also important to note that you need to do this on your own. Chronicle does not connect to your accounts directly like Mint does. (This is also one of the reasons I like it.) I also would like to say that I DO NOT pay attention to what it says my expected balance is for the same reasons I don’t rely on what my bank account says. Its really important to think ahead and Chronicle is not a bank register. If I pay for something Chronicle does not automatically know about it.
Wow I have gotten off topic, anyway by canceling automatic bill pay and having an active and rotating list and reminders for when my bills are due, I came up with a system that allowed me to be in touch and see exactly when money was coming out and how it impacted my account day to day (really week to week). I was no longer surprised at how much or little money was in my account because I developed a hands on experience with my money. I think that this is really important. I have now started adding things back to auto-pay. (Many companies offer small discounts for enrolling in auto pay.) The time I spent doing this exercise has gotten me into the very productive habit of watching my money. In a pinch f I see that money is low I can run to the change jar (something I will talk about in a later post,) and deposit enough of that money to cover it before I get into over draft. But that rarely happens any more because I don’t set things to go out before I have the money.
Do you have any tips for getting more in touch with your money?