We
live in a society of instant gratification. Unlike our parents or grandparents
– who saved up for larger purchases – we are often tempted to splurge on
bigger-ticket items simply because we have a debit card in hand when we head
out “window shopping”.
And
aside from overspending thanks to the advent of debit cards, consumers are also
more likely to dip into overdraft, which ends up costing more thanks to fees
and interest that banks charge whenever you spend more than you have in your
account.
Basically, a debit card works like a cheque. The only difference is that
every time you use it, you’re immediately taking money out of your
account. That’s why when you overdraw it’s like bouncing a cheque – only worse
because, unlike cheques, you probably don’t keep a record of every debit card
purchase you make.
You may even make a bunch of small purchases before you realize you’ve
spent more than you have. So before you pay for that coffee or lunch purchase with
your debit card, make sure you have enough money in your account to cover it.
Revert to using cash for daily expenses
Cash
controls spending, plain and simple. Using cash to pay for everyday purchases
such as coffee, transit, lunch and magazines alerts you to the idea that you’re
actually spending real money. You just don’t get the same cautionary sense when
you haul out plastic, be it a debit or credit card.
There’s a
distinct cognitive event that happens when you handle money – it’s called awareness.
Over the counter goes the five dollar bill and back comes a loonie, a dime, two
nickels and four pennies.
Did you
just add up the change above to determine how much money you have left? Did you
think about what that purchase could have been? You see, you are much more
conscious of this imaginary purchase than if you had paid with plastic.
Now, add
in the awareness of the bills left in your wallet and you become attuned to
your temporary wealth, or lack thereof. At the end of the day, what encourages
or cautions many consumers about spending is knowing where you stand from a
financial perspective. That’s why cash can help control spending. Using cash to
pay for everyday purchases alerts you to the idea that you’re actually spending
real money.
By allotting yourself a weekly cash
allowance for entertainment and everyday expenses – such as that daily morning
coffee or weekly movie – you are building a budget around what you can spend on
these purchases. And once the money in your wallet has been spent, you have to
ensure you fight the urge to withdraw more cash or resort back to using your
debit card.
Be
realistic about what you typically spend on these items in a week. If you routinely eat out for lunch
or stop at Tim Hortons for coffee, count that as well. If you think you’re
spending too much on these items, you can then decide to find a less expensive
alternative, such as brown-bagging your lunch or making your own coffee.
Let’s say,
for instance, that you start the week off with $50 in your wallet and you began
to spend it on your purchases. You will see $50 turn into $40, $40 turn into
$25, $25 turn into $15 and so on. Every time you look into your wallet, you
will see what’s left over from your original $50 and be aware of how quickly
your money is being spent. This alone can make you think twice before making a
purchase.
If you
have any questions concerning budgeting, contact your Dominion Lending Centres
Mortgage Professional at Griffin Financial Group.
For further inquiries as to how Dominion Lending Centres Griffin Financial Group can help assist you with preparing for your mortgage experience
Visit our websites:
Call us at 705-745-3522
Toll Free at 866-488-3522
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