We all have been there. You swipe for a group of things, check your account balances, see things are okay, and move on with life. The next day you're in the store and boom, card declined, or you get a notification that your account is in the negative and you have been hit with an overdraft fee. It's so upsetting, it's so embarrassing, and you say to yourself that you definitely wouldn't have swiped your card if you knew money wasn't in there. And you're wondering why...
Well this isn't always by accident, and it isn't always your fault, it's actually a little thing in banking they call "debit resequencing" a "random" rearrangement of your transactions. It has been shown through a number of surveys, and studies that banks actually don't arrange your transactions by when they were done, but actually reformatting them by largest transactions first. In short your transactions probably look like this:
Real life - Bank account -
Monday: Coffee $3.50 Rent: $1500
Tuesday: TV/Wifi $150 TV/Wifi: $150
Wednesday: Classpass $12 Classpass: $12
Thursday: Rent $1500 Chipotle: $9.00
Friday: Chiptole $9.00 Coffee: $3.50
So in short what one can really say is.... you can never really trust what the bank says you have in your account. But if you can't trust the bank then what the hell are you supposed to do?
Well today we're going to go through my personal strategies of avoiding the attack of the overdraft.
So here's how I do this and why.....
I leave my debit card at home and only carry Cash:
My friends make fun of me all the time because I carry cash around like I'm some drug dealer. But there is a method to my madness:
1. I make a budget for what and where I'm going to spend my money for the week.
This helps me plan out exactly what I'm spending my money on and why. If you know what's coming there are less surprises.
2. It mentally reminds me that there is a limit.
his personal allowance lets me know that if I spend all of this cash, it's over I can't spend any more money. I know you've fallen in the trap of "buy one more round" or "that outfit is type fire you should buy it" before. When you look in your wallet and only see $20 dollars left.... you're entire perspective changes. You become very thoughtful on what you're spending because you know you have to go all the way back home to get your card in order to get more money.
3. It's so easy to tell someone "no disrespect (shows cash) but this all I got on me"
Once you show someone that there's no way they can even convince you to spend more. It'll also push them to ask you the million dollar question "why don't you carry cards on you?"
4. But what about emergencies?
That is something you have to determine for yourself. Think of your last monetary emergency? How much did you need for it? How much of a role did money play in said emergency? Were you able to go home at any time during the emergency? By being able to answer these questions you can determine how much emergency money you should carry.
5. What if I lose my wallet or it gets stolen?
Carry small amounts. Unless planned otherwise, I try my best to leave my house with $35 dollars a day. With a goal to only spend $20. When I get home I reassess what I've spent and add to my money so that I have $35 dollars to start then next day.
6. Save receipts.
This helps come tax time, but the other reason is to really analyze what you're spending your money on and if you can change your spending habits. If you're spending $15 dollars a day on lunch all by yourself or with coworkers, maybe you should change that. If you're going through $60-$70 dollars 2-3 days a week on drinks, maybe that should change too. What we fail to realize is that building wealth doesn't only come from large financial transactions, but from having small, good habits.
7. Delete Car apps and only redownload them for truly needed usage & unlink your card from your phone.
In all honesty, I love high quality convenience. I'm also notorious for using my Apple Watch to pay for shit. I've slowed down my usage, and you should too. Also for absolutely no real reason I will use Uber, Lyft, Juno, Car2go. Like I will deadass have a 6-8 block walk to the train in the early afternoon, and take an Uber home instead. If the average Uber ride is $8 dollars and you do this 10 times a month that's $80 dollars that you could've saved. So I've picked up the practice of saying "if I really need this Cab I'm going to download the app and log back in" this small annoyance usually reminds me that I should do the right thing and walk my ass to public transportation or walk home in general. Because nothing is worse than having an overdraft payment of $36 dollars because of a $4.59 Uber you took 3 days ago.
8. Seamless, Grubhub etc:
This shit gotta stop. Y'all got mealpreppers all over your damn timeline and you still ordering seamless? If we building wealth, we can't be spending it all on delivery. Budget some time and cook. Lately I've been stocking up on soup for those moments where I'm not sure what I want to eat and I'm scrolling through my past orders. Don't spend the money, make something. It'll ease your mind for the worlds stresses, and it also will serve you well in the future when you want to cook for someone.
9. Move your bills to your credit card.
One thing I'm not is a credit guru. I have 1 credit card that I froze and left at my momma house a few years back, but I've been able to maintain a decent credit score because all of my bills are on my credit card. Then I just pay my credit card off at the end of the month with my bank account. This prevents overdraft fees because unlike a regular bank account you can't overdraft on your credit card, if you hit the limit? DECLINED. NO OVERDRAFT.
10. If you insist on using your card.
Do not opt-in to any debit card service that allows overdraft. No overdraft, no fee. So read your debit card account contracts and make sure that you're not in it, or ask to get out of it.
Too many banks use this strategy as a structure to collect fees so I can't recommend one bank over another. But like I've said before, the age old saying is... Cash is King. I hope this adds some money to your pockets, and you turn it into some investments that will grow your wealth.
Keep stackin' that paper y'all.