Keeping Small Spending Under Control

In Even a Small Leak Can Empty Your Money Bucket Quickly I noted how a small expense (like ATM fees in this case) can drain your finances slowly but surely. A reader left a recent comment to this post that summarizes (and adds to) my thoughts and I thought it was worth sharing with everyone. His comment:

The problem is larger than fees. Why do people make so many spontaneous withdrawals? It comes down to lack of budgeting and spending discipline. They find themselves on the street feeling like grabbing a bite or picking up some useless item, and then finding the next ATM around to quickly satisfy the need with disregard to fees.

A person keeping a budget knows where and when they spend and keeps adequate cash on hand, minimizing and controlling withdrawals. Like other financial traps, convenience encourages frequent transactions and associated costs.

Yes, it all stems back to having a plan and following it. Seems like the simple stuff is what trips up most people.

Personally, we make a trip to the bank once a week or so to deposit a check (an expense check from work, an income check from our side business/hobby, a refund on one product or another, etc.) When we do (I say "we", but it's my wife that usually goes), we check our cash levels and if we know we'll need some in the near future, we take some out. We always keep enough on hand to cover our current spending plus a bit more for safety. I don't think we've used an ATM in the past six or seven years.

That said, ATMs aren't the real issue. The point here is that any "small" spending (treats at the local convenience store, two sodas a day at work, eating out more than needed, etc.) can deplete your finances and we all need to be aware that this spending can certainly add up to some big money. Deciding to spend our money in these ways is one thing, but if we're losing money here and there just because we're on auto-pilot, that's a dangerous place to be.

Comments

[Jack]

If you have decent income and are good about saving, I suggest doing the following. Next time you're at the bank, pull out around $500 in one hundred dollar bills.

This becomes wallet/purse money. Then, make a game of making your nice bills last. See how long you can go without breaking that last hundred dollar bill. Additionally, there's something comforting about having hundred dollar bills in the wallet if you need them in an emergency; frankly you don't want to spend them because you like having them.

This system works great. It prevents costly ATM visits, it really can stretch your cash if you have the discipline, and it ensures you have access to cash in an emergency.

So, stick a knife into costly fees. Carry around a few $100 bills, make them last, and sleep easy.

[Matt]

Um...how about switching your operating account to a bank that has ATMs near where you are? I honestly don't remember the last time I paid a fee to use an ATM...it's been at least five years, I know that. I can understand paying ATM fees if your home bank doesn't have national reach and you travel a lot, but paying ATM fees within a 200 mile radius of your home is a sign that you're using the wrong bank, regardless of how often you make withdrawals or how closely you track your spending. (And no, I don't avoid ATM fees by using tellers. My last face-to-face interaction with an employee of my operating-account bank was the one in which I opened the account, ten years, six bank mergers, four bank names, five states-of-residence for me, and dozens of major life changes ago. Dealing with tellers is too much of a hassle...and in my particular case, there are other significant disadvantages to banking in person.)

Actually, in my experience carrying cash makes it more likely one will overspend on impulse purchases. Having to stop at an ATM to finance an unplanned purchase involves adding an extra conscious decision to any purchase of meaningful size, and if a person is having real trouble keeping their spending within reasonable limits, advising them to limit the quantity of their bank transactions (rather than the size) is likely to be counterproductive.

[Tim]

my wife and i each carry only $20 in cash. i don't like the idea of $100 bills in my wallet, because you have a different mindset when you are carrying $100 bills. plus there we don't have any need to carry cash. we either use our credit card or debit card. we only carry $20 for emergencies when some place doesn't take debit or credit cards.

I agree with Matt, that if you are spending money on atm fees, you probably either aren't fiscally aware to begin with, or you just don't care. i have my primary bank in texas, but when i move somewhere, i will open a local account simply to avoid things like atm fees.

USAA has a new feature that allows you to deposit your check by scanning the check. I hope other banks go to this, as it saves money and time by not having to mail in the check or drive to the bank to deposit the check.