Each time we spent money, we replaced it with a receipt. And when the money was gone…
We had no more to spend until next pay.
Being a visual person, I liked this method. But as debit technology grew, my husband gravitated to it quickly. Because he thought cash was too easy to fritter away.
Little did we know how easy it is to fritter money away by debit, too.
The forward trend toward a cashless society means that 20-odd years later, I struggle to carry enough money for the downtown parking meters. Let alone to do the weekly shopping.
It took us 10 years to use up our final box of cheques (since these days we pay most bills online).
Related: Free Chequing Accounts
Would it be better to go back to cash for regular weekly purchases?
Maybe. I’m tempted to overspend more with debit than with cash. Especially if I’m unaware of my husband’s purchases. And it’s led to being overdrawn more than once…
Little numbers do add up.
I don’t have quite the same issue with my credit card. Gone are the days of my careless youth when my VISA burned in my wallet and represented magic money—until the end of the month, that is. In the last several years, our credit card has stood in place of our emergency fund, rather than impulse buys. This has brought its own kind of stress. More on the credit card issue in a subsequent blog.
But I do wonder about my debit card. Does it make my money invisible? Does it create extra temptation to spend?
Does a debit card make your money invisible? Does it create extra temptation to spend?
“Absolutely,” says Kathy Nutter, a former personal banking officer with Scotiabank and a current mortgage broker with The Mortgage Center. “We don’t think twice about it before we use our card. I always carry a little bit of cash with me, so that I can see what I’m spending.”
Instead of using just one or the other, Kathy employs a hybrid strategy. She says she plans all her purchases and uses cash or debit based on the cost of the item. “With smaller purchases like clothes, or [going out for] coffee, I use cash for those things. With larger items, [like furniture or an appliance], I’ll use debit.”
Whether money is spent via debit or cash, it all comes back to awareness, she adds.
“I read a book once a long time ago called The Automatic Millionaire,” she explained. “It recommended that for two or three weeks, you monitor every single cent you spend, down to the penny. Back then I was going to Tim Horton’s I think, five times a day. I never thought about it much until I added it all up and saw it on paper. So I limited myself to two a day, and saved what I would have spent on the other three in a savings account.”
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Instant Information, Instant Everything
In 2016, Moneris, a Canadian debt and credit processing company, predicted that by 2030, cash will represent only 10% of transactions made in Canada.
Tap cards are even more attractive these days for their speed and ease of use. And as “mobile wallet” technology matures (digitized credit or debit card information on your preferred mobile device), Moneris expects people ages 18-34 to embrace it with the most enthusiasm.
Since people naturally gravitate toward convenience, the market has responded by developing mobile apps like Mint, or YNAB (You Need A Budget), which sync with your bank accounts to track your spending.
These apps make Kathy cautious. “I would be hesitant to use those,” she says, shrugging the idea away over the phone. “I know what is in my account at all times and I would be concerned about a third party having access to my data.”
Still, you are only giving permission to the bank to send a log of transactions to a company which categorizes those transactions for you, and proposes a budget, based on your goals. But they can’t transfer funds or do any banking with those apps. It’s a one-way transaction. We take a similar risk when we make online purchases with a credit card—and that trend is here to stay.
It’s prudent to remember that we already share a lot of information with third parties. For example, if you are a heavy user of Air Miles or any other store-specific rewards card or credit card, they have much more information about you than you realize.
Related: Get Max Value for Your Air Miles
They not only know where you bought things and how much you spent. But they have an exact list of your purchases. And can probably predict not only when you’re going to run out of toilet paper, but what brand you’ll buy.
Data-mining is everywhere.
Security issues notwithstanding, I talked to three New Brunswickers who love these apps. Amy Pattison of Moncton, highly recommends Mint. “I use it on my computer and have the app on my phone. There are goal-setting options which can send you email reminders/updates about your goal, which has been helpful. Another feature I like is that you can customize it to fit your needs by creating your own categories for expenses.”
Duane Collicott, an empty-nester from Fredericton, agrees. “Mint has definitely made it easier for me to see where we're spending. It's more visual and much easier than papers here and there. The budgeting tools are great for keeping on track too.”
Younger folks embrace its potential, but it doesn’t stop them from combining it with old methods.
“I also love that it is so readily accessible across multiple devices,” says Bethany Wheaton, from Sussex. “Whether I am at home, at the computer or in the middle of the grocery store with my smartphone, I can quickly see what is budgeted and available in each envelope. No stopping to count cash.”
Bethany is an enthusiastic YNAB user, who loves the technology, but eschews debit purchases in favour of the old-style cash envelope system.
I must admit, I can see the appeal.
I like that it’s visual and does the organizing for me. Anything that helps me stay on this financial diet is a plus. While we continue to weigh the pros and cons, I asked Kathy if she has any other tips to keep from overspending with my debit card:
4 Tips for the Overspender
1. Is it a need or a want?
It requires some discipline to walk away from the temptation of an unplanned purchase—also known as the Impulse Buy—but it will pay back dividends.
2. Use cash for everyday purchases.
Using cash to pay for everyday purchases such as coffee, transit, lunch and magazines makes the expenditure tangible. You don’t get the same message when you haul out plastic.
3. Allot a weekly cash allowance for entertainment and everyday expenses.
Tracking these purchases will give you a good idea of how much you’re spending. And once the money in your wallet is gone…it’s time to brown-bag it.
4. Do not attach your debit card to your savings account.
‘Nuff said, right?
Failure to Plan is a Plan to Fail
For those who are already savvy spenders, I doubt any of this is news. I suspect my problem is not with the method of expenditure, but with my (lack of) preparation and planning for it.
It always comes back to that, doesn’t it?
And I suppose, if all else fails, I can bring just enough cash to make my purchase—and leave my debit card at home.