Avoid Overdrafts and Unavailable Funds
Standing in line at the grocery store, the clerk scans each item as it comes down the conveyer belt. You’ve been waiting propped up against the cart for 10 minutes. Shifting weight from leg to leg you’ve memorized the covers of the tabloids and contemplated the choices in easy access gift cards. Looking behind you, there’s nothing but expressions of frustration. Your items are scanned and the next person waits eagerly behind you ready to pounce as you swipe your card.Please wait for cashier.
The cashier gently looks up. They hate to do this. It’s uncomfortable for them to tell a customer their card has been declined. Not only that, but they feel the frustration of the looming line too. The person behind may sympathize under normal circumstances, but they’ve been waiting 10 minutes too and are just pissed that you are taking up their time.
Regardless of the amount I would have in my savings account, when my personal spending account is out of funds when I’m trying to make a purchase, I am embarrassed. I openly admit and have no problem stating that my card is declined. However the social stigma and apprehensive cashier mannerisms make everyone uncomfortable.
The New Zero
Limiting the funds in your personal account is good for restricting spending money. You can’t spend more than you have. However, the social embarrassment caused by this may not be worth the commitment to your budget.
Attempting to check your account everyday before you go out doesn’t always work. There will be transactions retailers are still processing as well as pending transactions mysteriously appearing on both sides of your checking account. It may say $50 available, but after my $40 purchase is decline, I check again it says $20 available.
This is easily solved by creating a new zero balance for your personal account. An easy number to start with is 50% of your personal expenses. If you allow yourself $200 every two weeks, then make your new zero $100. Automatically equate $100 with no money left in the account.
When you check your account, and it says $125. You have $25 left to spend. If when you log in again it says, $80. Well, you’re out of money and you over spent your budget by $20. Personally, I would rather over spend my budget by $20, avoid the card denied scenario, and reign in my spending next week. If you’re biggest problem with your budget is that you overspend by $20 every other month, you’re doing great.
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November 14th, 2006 at 12:42 pm
There’s an even better way to do this. I had trouble convincing myself that $100 was *really* zero, since it said right there in Quicken that I still had $100. (Of course, I’d probably forgotten to enter some transactions, so the actual account balance was less than $100.)
I wrote myself a check for $100. I entered it in Quicken. Then I tore it up. Now my checkbook still balances (there’s just this one check that never clears), and when Quicken tells me I’m at zero, I stop spending.