Photo: Flickr / swanky
A couple of friends recently confessed that they live check-to-check.To make matters worse, they only check their bank balance once or twice a month.
We called in the finance experts to help because being one step away from debt is never a good look. Read on to see their financial makeovers, and to get some ideas on how to stage your own.
Note: These two women wished to remain anonymous, and are not in any of the following pictures.
The mistake: The more we rely on our debit cards, the easier is to go over budget and risk having your bank misorder the charges to slap you with overdraft fees. It's the reason my friend keeps paying $39 for that Starbucks latte.
The fix: Get in the habit of checking your bank balance morning, noon, and at night, says financial expert Farnoosh Torabi.
'Rather than compartmentalising into a once-a-month chore, make checking statements a habitual, daily thing.'
The mistake: Not knowing your balance can easily let you 'forget' about incoming bills and checks that are waiting to clear.
It also keeps you out of sync with your money, something you don't want to do in an era of rampant identity theft.
The fix: Download the app!
It's free, and you'll stop BS-ing yourself about how much you can safely spend.
The mistake: Where do we start? You can't stop blowing money, much less put any away, until you know what you're working with.
The fix: Start by tracking what you spend in every category (groceries, clothes, etc.) for about a month, then assess what you need versus want, says Stuart Ritter, a financial planner with T. Rowe Price.
Once you've identified what you can ditch, you'll know how much cash to put toward monthly expenses and can start saving the rest to reach long-term goals.
The mistake: Blowing too much money on rent is easy in a city like New York, but the outlandish costs could keep you trapped in the check-to-check cycle, a dangerous thing since that can keep you from shoring up money for financial emergencies like a job loss or illness.
The fix: Ask yourself if the place is worth losing your discretionary income.
If it isn't, the fix could be as easy as downsizing or finding roommates to help split the bills.
The mistake: Your 90-year-old self just called. It said you just blew your retirement on $200 shopping sprees each month and $50 on meals out every five or six nights a week.
The fix: Learn to treat yourself, but frugally. Whether that means savouring the small (free) things, or splurging consciously, your future self will thank you.
The mistake: This is a total budget-killer. But don't take it from us--just ask our friends who said they blow between $10 and $20 on meals each day.
Check out these Bento Box lunches to get inspired.
The mistake: Floating a check, or writing one before the money has posted to your account, is a risky move, says Andrew Schrage, founder of MoneyCrashers.com.
The check could bounce, meaning you'll get hit with annoying fees. And 'gaming the float' is getting tougher to do since banks are clearing their checks much faster these days. Finally, according to consumerist.com, it's illegal.
The fix: Set up automatic bill pay via your bank's online site or your utility provider's. Not only will everything go through on time, you won't have to worry about overdrafting your account.
Most transactions can be set up to only withdraw available funds.
The mistake: Aside from the embarrassment of having your debit card declined, you risk going under and not having enough money to cover your monthly expenses.
Getting hit with late penalties isn't pretty and can drag down your credit score, leading to all sorts of headaches.
The fix: Open separate savings accounts with an online bank like ING, which lets you keep several at once.
You can track your savings progress at a glance, and automatically deduct what you need from each paycheck.
The mistake: 'Peer pressure is so rampant in your 20s, but as you grow older, your time gets more precious,' Torabi says.
Your friends' money values may not align with yours, and soon you could find yourself splurging on things (brunch, booze) that don't matter to you in lieu of what does.
The fix: 'Mind the company you keep,' says Torabi, whether that means making friends with similar values, or ditching the ones who tempt you to overspend.
Otherwise, get in the bait of suggesting fun and free activities to do and not being afraid to stay in once in a while.
The mistake: 'The idea is to build a balance so you don't have to pay attention to your money,' says Adam Koos, wealth planner with Libertas. But until you get there, you should obviously be worrying about your money.
The fix: Switch to spending with cash, which will help you visualise just how much you've been frittering away every paycheck.
Likewise, start siphoning a chunk of each paycheck for savings to put toward emergencies and investments down the line. Your savings balance will grow before you know it.
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