One Reason People Cannot Control Spending
The younger generation (younger than 40 years old) use debit cards for everything, even paying for just a pack of gum at a convenience store with it. They rarely use cash and they simply look at the balance in their account from their phone to determine how much money they have. This debit card is on the same bank account they pay their bills from. Further, if they are married, often both spouses have a debit card on the same account! There is no way anyone can control spending with this setup.
I have learned over the decades of helping individuals and couples get their finances in order that very few people have any idea how much they spend on “fixed” expenses and how much they spend on “discretionary” items. Therefore, there cannot be any spending control if they don’t know how much they’re spending to begin with!
The Solution
I came up with a system for these people. First, you have a “main” checking account. This is where your paychecks are deposited and all your fixed expenses are paid from. Then you have another account (your “debit” account) at the same bank that has a debit card with it. Instruct your bank to automatically transfer a set amount from the main account to the debit account twice per month. The debit account is for all spending that is not a fixed expense, for example, haircuts, groceries, gas for the car, clothes, eating out, etc. All you have to do is check the balance in the debit account periodically to know how much money you have left. You can easily do this on your phone. If you try to spend more than you have, then the transaction will not complete. Therefore, you have defined how much you are willing to spend on discretionary spending. If you are married, I suggest you each have a separate debit account.
However, this only works if you do not transfer extra money from the main account to the debit account when you run out of money. Also, you must make sure that you are leaving enough money in the main account each month to cover all your fixed expenses. This requires you to determine how much you need for fixed expenses. That is a topic for another blog post!
If you find yourself having problems controlling spending we can help!