Updated: May 19
And it happened again....... another overdraft fee, which feels sort of like adding insult to injury, like wadding up your hard-earned money, and then just throwing it away.. (except in this case, the trash can is the bank.)
Picture this scenario: You've finally made a grocery list (Yay!), you've made it through all the aisles and gotten all the things, you wait in a (long) line, finally make it to the register, engage in a little small talk with the cashier, get the total, swipe your card, and then......
you hear those awful, gut-wrenching, heat-rising-in-your-cheek words... 'Sorry ma'am, your card did not go through, would you like to try a different card?' ......
If this has ever been your story, it's ok... we've all done it at some point, and the good news is that it never has to happen again.
What is this magical solution to your problem you ask? Well, it's not magic at all. In fact, it's pretty old school as far as the method, but with a little modern technology works like a charm.
It's called 'Balancing your Checkbook'.
Now, some of you may be thinking I'm being facetious, but I assure you that I am not. As a 22 year-old fresh out of college, starting my first 'real' job, I had no idea what that process really entailed, and had quite a few 'situations' throughout the rest of my 20s. You would think after a few of these 'situations' that I would have looked for help and found it. I didn't. I became pretty good at keeping track of my outstanding purchases 'in my head'. This was obviously very inefficient and resulted in a pretty wide margin of error (in other words, I kept having 'situations').
The problem with those 'situations' I soon realized is that they usually occurred AFTER my account had gone into 'overdraft' and additional charges/overdraft fees had already been assessed.
The average overdraft fee is around $34, and these tend to add up quickly when you're living paycheck to paycheck. Every time I paid those fees, I felt sick because I KNEW it could have been avoided - if only I had remembered THAT bill/online payment/store purchase I paid that had not been processed as yet.
Eventually, I realized I needed to know before EVERY purchase, what my ACTUAL available balance was, not just what the bank already 'knew' about (that is, what was already processed/charged).
So back to our solution..... For those of you who do not already know what balancing your checkbook entails, it is simply keeping your OWN record of the transactions you perform with your account/debit card so that you know the 'real-time' balance regardless of what your bank app, or account transaction page, shows.
How does one do this? There are many ways to accomplish this task.
You can use a paper version (if your bank still offers them), or even a very small notebook that is easy to carry.
👈 In fact, I found this one on Amazon for a pretty affordable price.
However, in this digital age, I would suggest one of the many free apps that are available for download in your App Store. The app I personally use is called Checkbook, it can be downloaded for iPhones and Android phones.
If you're not quite ready to jump right into a new app, try this Digital Check Register
that I created using Google sheets.
It has the same basic functions as a paper version, with two "upgrades"😎 - (1) it automatically calculates your balance and (2) you can set google sheets to allow you to edit offline and it will update when you have an internet connection.
Simple Steps to Balance your Checkbook:
Here is the simple process that will take you one step closer to achieving financial freedom:
Step 1. Create your account (if using an app) and enter your beginning balance (this should be the balance of your account right now according to your bank).
***Please note that you may still have some outstanding charges that have not yet been processed by your bank. Go through the recent transaction details on your bank's app, and compare them to any charges that you know of, which have not yet been processed (for example receipts you have stuffed in your wallet or purse). You will need to enter these into your register and deduct them from your current available balance.***
Step 2a. For EVERY purchase following this first entry, every time you use your account, either by entering your account information online or swiping your card for a vendor, enter the amount of that receipt immediately as an expense/debit so that the amount is deducted from your available balance.
Step 2b. For EVERY amount of money being deposited to your account, enter the amount as income/credit so that the amount is added to your available balance. Note, if it is not cash, or a direct deposit, you may need to consider these as 'Pending Transactions' until the your bank reflects the funds as available.
Step 3. Reconcile your income and expenses by marking them as 'cleared' by your bank in order to keep track of which ones have posted, and which ones have not (or that are still 'pending').
The checkbook app (and other apps like it) have other useful features, such as:
A pie chart of your expenses - for easy analysis of your categories of spending. This is important because when you view your expenses in categories, it is easier to identify where you could possibly save, or may have been spending more than you realized. An example would be comparing your 'Groceries' category for the month to your 'Eating Out' category. This is probably the most common area that people find extra savings 🤑 in their budget.
Memo options for your expenses - to put a description or additional details for each expense/receipt. This is useful for your end of the month review to help you remember the reason for a 'non-recurring', (not weekly, monthly, or annual) expense.
Recurring Payment options- to enter expenses you pay monthly so that they show automatically in your account. *** I would not recommend using this feature when you are first starting out because it will not post until the day you set as the due date/payment day. For example, you get paid on the 1st, you need to make a purchase on the 3rd, but your balance does not reflect your recurring payment on the 5th that you must account for in your expenses before making your purchase. For more information on creating your budget, see my post on Saving With a Zero Dollar Budget.
To be honest, this was only one of the first steps in my journey to becoming financially independent, but it was a crucial step nonetheless.
Next step, creating a budget that empowers you to buy the things you need AND want.
Wouldn't it be nice to walk into your favorite clothing store knowing exactly what you want, and buying it with full confidence that it is within your means to buy it, and that the expense is not going to take away from your ability to purchase something else you may need for you or your family later on in the month? Then you should definitely read my post on Saving With a Zero Dollar Budget.
As an independent, licensed representative of Primerica Life, I can provide a complimentary, personal, confidential analysis of your financial situation using our Financial Needs Analysis tool. Schedule your appointment now. **Appointments will be held via Zoom.
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