Don’t Trust The Card or Yourself Without a Plan

Don’t Trust the Card or Yourself Without a Plan

In the world of purchasing with plastic (credit or debit card) we sometimes lose sight ever so quickly of exactly how much we are spending! In fact, I find that by the time I am in the parking lot after making a purchase my mind has already moved onto the next thing. By the end of the week when I am about to make another purchase I have already forgotten that I even made the first purchase which causes me to have a false idea of how much money I actually have left to spend. Before I know it if the plastic I am making a purchase with happens to be a credit card then I could so easily fall into the trap of purchasing an item with future income (money from my next paycheck that hasn’t even hit the bank yet). This can happen to even the best of us.

Let me be clear I am not suggesting we should all revert back to the archaic envelope budgeting system and cash. However, I am suggesting there a few things we can recognize when purchasing everything with a card to ensure financial success.

Here are a few tips that can help lead to financial success if you pay your bills and make all of your purchases with a card, especially if its a credit card.

1) Keep Track of What You Spend.

Don’t fall into the trap of only reviewing the balance on your credit card every couple of weeks or once a month when your bill comes due. If you are using a debit card be careful to avoid only reviewing the available balance in your checking account when in the checkout line at a store or on pay day.

I am not a psychologist by any means, but I know myself well. I do not think I am alone when I say that it is easy to underestimate how much I’ve spent since I last looked at the balance on my card and overestimate how much I can afford to spend when I have not sufficiently tracked my previous purchases. The Consumer Financial Bureau suggests that there is some research to back the assessment that I have made.

It may not be fun at first, but putting a spending plan in place and rigorously keeping up with it will be one of the greatest stress relievers you can experience regarding money. If money is a source of stress or anxiety it can be tempting to ignore the way you spend, your bank account or credit card balance, however, this will create more stress in the long run and financial disaster I might add. I personally prefer to track my expenses through the use of budgeting software called youneedabudget.com. I know others that prefer good ole excel spreadsheets, pen and paper, or mint.com.

2) Don’t Trust Monthly Minimum Payment Offers.

When things are tight and there are extra items needed or wanted, it can be extremely tempting to take advantage of the credit card offer to carry the balance on your card over to the next month and only make the minimum payment. This can be especially tempting during times where there is stress pouring in from other areas of life.

It is important to recognize that when you only make a monthly payment, it means you are committing your future income to interest payments on items that are not worth paying interest on. Also keep in mind credit cards offer some of the worst, if not the worst, interest rates. They can get up to almost 30%! Nerd Wallet, a reputable personal finance website, goes as far as to say they are designed to keep you in debt. Click here if you want read more on minimum payments.

It can be tempting and you might say to yourself that you will be able to pay it all off the next month before the interest takes off and gets out of control. That can be a dangerous place to be especially considering personal finance tends to be one of the most unpredictable areas of life, because it involves almost every aspect of life. You cannot predict when your car is going to breakdown, you are going to have an emergency room visit, animal needs to go to the vet, or some other unexpected expense shows up.

3)Preemptive Planning vs. Reactionary Spending

If you want to beat living paycheck to paycheck, pay down debt, and avoid having to pay only the minimum payment on a card it happens through planning. The words “budget or spending plan” are not everyone’s favorite words. However, they can be such a lifesaver! For some they do not like the idea of a budget because they feel that it will constrict their financial freedom to do as they please. For others it is just an overwhelming, daunting task and an area that causes anxiousness so they just avoid it.

I would like to suggest that choosing to be preemptive in planning, how to spend and save your money, will actually create a sense of financial freedom not experienced beforehand and will help reduce anxiety surrounding money. Planning our spending will prevent those moments when we react to a need or want, have not planned our spending for the pay period/month and then swipe our card, and we can’t help but experience the anxiety surrounding the purchase. The all too familiar questions surface in our mind such as “can I really afford this and will I have enough left for my bills due soon?” I would like to suggest these questions almost steal the joy that could have come from the purchase.

On the other hand, when you take time to plan your spending upon receiving a paycheck and then follow point #1 of tracking your expenses, you can feel comfortable spending money because you have planned the spending and do not have to deal with questions like “Can I afford this and will I have enough for my bills?” It creates a since of freedom and peace of mind. Finally, it is important to be aware that everything might not always go according to plan, however if there is a plan in place you will know how to adjust to ensure that you are staying within your means.

Saving in a World of Targeted Ads

I originally wanted to write a blog post about subscription services, and how they eat up your income. On my laptop I started researching the most popular subscription services.

A few hours later I opened Instagram on my phone and it was filled with ads for various subscription boxes. The two I get most frequently is for Fab Fit Fun and for Hello Fresh.

I really love the song “85” by Andy Grammer. The lyrics are:

“There is a lie that I believed
The more that I got, the more I’d be free, free, free, free
So I’ve been away, making the green
See, the more that I get, the more that I need, need, need, need

I like to think that I am highly resistant to targeted ads, but it is a constant struggle to remind myself that I don’t need these products.

A few weeks ago, I kept getting, and still do get, ads for different tooth powders. I had never heard of tooth powder, yet the ad was so enticing that I almost paid $30 for a TINY container of tooth powder.

Subscription boxes and other products that these ads are often for have a way of eating up our money.

Here are strategies I use to resist targeted ads:

  1. Avoiding them. As I am scrolling through social media, I often will click hide on ads without really reading them.
  2. Wait 24 hours to purchase. Often the ads are trying to rush you to buy NOW. Just wait. Often after 24 hours you realize naturally that you really don’t need it.
  3. Comparison shop. I sometimes find myself convinced by the ads that this product is the best on the market. But if I take a moment to comparison shop, I typically find that the product is overpriced compared to other products.

Finally, having a written spending plan can help you navigate the appropriate time to make purchases on items that you may want, but do not need. If you would like help building a spending plan personalized to your needs, schedule an appointment with a Peer Financial Counselor at the Center for Financial Success. Visit our website to schedule an appointment!

Goal-Setting is like the One-Two Punch

The “One-two punch” is one of the first moves taught to a boxer in training because it tends to be easy and effective. It consists of quick jab with one hand followed by a cross punch (a much more potent punch than a jab) from the other hand. Secondly, this is a fundamental technique to build upon more complex techniques in the boxing world. As a former athlete this analogy resonates with me, because I have understood from experience the importance of the developing the fundamentals first.

Goal-setting in financial success is just that – the fundamental piece that sets you up to take on every financial situation. Successful goal setting is a multi-step process. People often say their goals are tasks like retiring with $1 million, visiting Paris, swimming with dolphins, saving for a new car, or starting an emergency fund. I would like to suggest that these are dreams not goals, and with a little bit of work they can become realizable goals. Just like the one-two punch doesn’t end with the first jab because the first jab doesn’t accomplish the job but rather sets up you for the second blow in the same way dreaming of what you want sets you up for the opportunity to create incredible goals. At the Center for Financial success we strongly encourage forming specific, measurable, attainable, realistic, and timely goals. Specific goals have a much better chance at being achieved then a vague goal. For example, if you want to go on a spring break trip and leave your goal at saying, “I want to go somewhere for spring break” you will be much less likely to actually achieve that goal then if you state, “For spring break 2019, I would like to go to Destin, Florida for 5 days and stay at a beach-side condo that costs $100 a night.”

Measuring a goal is the point where you set forth concrete criteria to see if you are staying on track to attain your goal. When you have established such criteria and then you use the measure to evaluate if you are on pace to achieve a goal it can create a sense of accomplishment that encourages you to keep pressing on towards your goal. Let’s assume you have ten months to save $1,000 for the trip to Destin. This would mean you need to save $100 a month therefore you can measure the goal by looking at your savings at the end of each month and see if you have save another $100 dollars.

The final three steps are attainable, realistic, and timely. This part involves examining your time frame for achieving your goal and determining if the time frame is realistic and attainable. For example, if spring break is 10 months away and costs $1,000, but you are in a position where you are only able to put $50 a month towards this goal then it is not attainable. At this point you should not ditch the goal, but rather determine how to proceed. Should you adjust your time frame? Maybe waiting until the fall would make more sense or you might determine that you have enough time to pick up an extra side job to stay on the same time frame.

When making realistic goals, your goals need to be personal to you. It is easy to build goals based off what everyone else is doing, but those same goals may not truly align with what you define as success and a full life. Do not be tempted to live someone else’s dream. Figure out your dreams, make them goals and write down a plan to accomplish them.

There is little you won’t be able to accomplish when you have written goals that you actively work towards and track your progress. Finally, it is tempting in the goal-setting process to make goals that are easily achieved and that never challenge you to reach them. I caution this because I am not convinced that you will be able to achieve the dreams that you will really want achieve. Do not let the fear of failure keep you from achieving tough goals!

At the WKU Center for Financial Success we are in the business of helping you make your goals a reality. Consider scheduling a free appointment with one of our Peer Financial Counselors. It is easy, just visit our website and fill out a form that takes 30 seconds and you could be on your journey to achieving your dreams!

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