Today we have $55 in our bank account.
24 hours ago, we had $500.
Five days ago, we had $900.
Most of the transactions that took us from $900 to $55 in five days were less than $30. Many less than $20. There were a few big transactions (a car payment, a student loan payment, a utility bill, groceries), but everything else was little.
There are two lessons that I have learned from this (again):
- Your bank balance online does NOT reflect what you can actually spend;
- Conscientious spending is the only way to avoid “spending creep”
My husband got a promotion (Yay!) and with that promotion, a raise. He’s earning at least $6,000 more a year than he was, and that’s before any bonuses he might get.
We’ve been very excited about this, as you might imagine. An extra $6,000 a year means an extra $400 a month (after taxes), which is very cool. As excited as I was about the extra money we were going to have coming in, I stopped paying as close attention to what we were spending and where.
Normally, I watch our finances like a hawk, updating our checkbook daily. You may roll your eyes, but it makes me feel better and it’s one of the 5 Daily Steps to Improving Your Finances recommended by Frugal Dad. But because I was operating on the idea tha we were soon going to have more money every month, I got a little lax about tracking our money. Instead of updating our checkbook every day, I was just watching our balance online.
Enter lesson #1: Your bank balance does NOT reflect how much you can actually spend.
This is a definite downside to banking online. Back even 20 years ago, you either knew how much money you had to spend because you kept a record in your checkbook, or you had no idea until your statements came in the mail. But now, with constant online access to our accounts, most of us don’t even bother keeping track. We just assume that if there’s money in our account, we have money to spend. BAD IDEA.
Because I had been tracking our spending previously, and not just relying on our bank balance, I knew roughly how much we had paid that hadn’t cleared yet, but even that wasn’t enough. Everyday I would check our balance and do the mental math; we had at least $500 in our account, so I figured we were fine. “My paycheck will clear any day now” I thought, so instead of restraining our spending, I just let it go.
But my paycheck hasn’t cleared. I’m not even 100% sure the bank got the deposit (I bank at Charles Schwab, which I LOVE, but it means that I have to deposit any non-direct deposit checks via the USPS), although I’m not ready to freak out that much yet. Which means that when one big transaction came through (car payment), all of the little transactions that I’d not been paying attention to suddenly added up to $55 in our account and two other big transactions about to clear (other car payment and car insurance). Yikes!
Enter Lesson #2: Conscientious spending in the only way to avoid spending creep.
Of course when we found out that my husband was getting a raise, I re-did my budget calculations. But we found our four weeks before he would get his new paycheck, and I forgot our old budget calculations were still in effect until then. We don’t get the shiny new paycheck until the 22nd of October, and until then we’re still needing to pay closer attention to what we spend.
But that’s the thing, even with the raise we should still pay close attention to what we spend. When I found out Ben was getting a raise, I was excited because that meant that we could save more. But it only means we can save more if we don’t start spending more than we are currently. Which means that I still have to watch our finances like a hawk (the day may come where this is not the case, but today is not that day), and we still have to agree not to spend more than $20 a week on eating out, etc., etc.
What can you take away from this?
I hoping that by sharing and explaining the mistakes that I’ve made, you will see them coming and be able to avoid them yourself. Paying attention to how much I’m spending is the biggest lesson I’ve had to learn, and I’ve had to learn it many times over the years. Maybe this time it will stick.
Learn from the mistakes of others, if you can, but if you can’t, make sure you learn from your own mistakes so you don’t have to keep making them.