This is probably the next biggest budget destroyer after charge cards. These are all the little (and sometimes big) things you buy with cash that no one bothers to keep track of. This became a big item when ATM’s came into being. That is, if you could only depend on what cash you actually had on you, your only other resource used to be writing a check. And then you would have that check stub staring you in the face forever with the question “did I really need to spend that?” or the statement “I shouldn’t have bought that”. And you had your check book ledger to show you how much you had left in your checking account. With an ATM card and the fact that most people do not keep track of all of their withdrawals, it is very easy to over spend to the point of being overdrawn on your account.
ATM’s have made our lives so much easier and so much more expensive. When our ready supply of cash is gone because we decided to buy a new wrench set or a new blouse, we just stop at the ATM and replenish our supply and make it easy to decide to go out to dinner instead of eating at home. ATM withdrawals have become as misused as charge cards and usually for the same reasons. Although we can learn to restrict credit card usage to just emergencies, the cash is easy to get at. In fact, when you charge something, you probably do not even know what you have for a balance in that account until your monthly bill comes. With an ATM cash withdrawal, you get your money and instantly see what your balance is now except that most people do not take into consideration any outstanding checks that have not been deposited. Thus you can be fooled into thinking you have more money available than you really do.
And what do we use these miscellaneous cash purchases for? Usually the biggest emergency in this small dollar amount will be for a loaf of bread. All the other purchases are usually just casual shopping. It is very easy to be walking through Wal-Mart shopping for a new garden hose (because the dog decided the old one was a play toy) and decide to buy some other “little” things along the way. But these little things can easily add up to over $100.
How can we cut back on this kind of spending habits? And although this is only a habit that can be broken, it is probably the most difficult of all of our possible savings. The first thing to do is cut back on “window shopping”. That’s when you know you do not have the money to spend but, maybe due to boredom, decide to go to a store or mall “just to look around”. These little excursions can cost you a lot of money if you do not have very good will power.
More importantly, you need to allow yourself just so much money a month in cash and, when that runs out, you do not have any more cash until next month. This is very tough to do. A slightly easier method that will help ease your way into this specific allotted amount each month is to keep a small notebook with you at all times. As soon as you reach your car (do not wait until you get home) write down how much you spent and for what exactly. A huge part of debt reduction and debt management is not spending money frivolously. Be aware of what you’re spending money on, and make adjustments.
Do this for one month and then go back through that list to see how many of those items were necessary and how many were just fun purchases. We are not saying that you should not make fun purchases. Life is about having as much fun as you can under your particular circumstances. But if you are in serious debt or even enough debt that it bothers you, then you need to spend some time (one year) saving as much as you can so that you can pay off those loans and credit cards.
Once those are taken care of, you will have a lot more money to spend on fun things in the future and you will be able to spend it without worrying.