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Sticking to a budget can be tough, especially with technology making things like balancing a checkbook and actively managing your credit card obsolete. It’s easier than ever to spend more than what you have in your checking account, which leads to overdraft fees. New technology can even lead to overspending credit. If you aren’t actively looking through your bills each month, you probably aren’t paying attention to your spending. That means you’re likely running up against high-interest charges added into your balances.
Thankfully, some modern-day payment companies are realizing the shortfalls of humans and are now actively trying to help us stay out of debt and truly save. But some traditional payment strategies still stand. For instance, the first and best way to avoid debt is to stay away from your credit cards whenever possible.
Credit cards are nothing more than temporary loans from a bank. They give you money up front that you must pay back at the end of the month, or billing cycle. The trouble starts when you spend more on your credit card than you have the means to pay off in a single billing cycle. This leads to higher costs, due to the high-interest rates attached to the cards.
If you are trying to stick to a budget, a debit card, cash, or cash-based payment methods are probably the best option. A debit card takes the money right out of your checking account, so you can only buy things with money you actually have. It’s like paying upfront with cash instead of at the end of the month as with a credit card.
Because debit cards are linked to your checking account, the one thing you need to be careful of is overdraft fees. This happens when you spend more than what you have available. It can be dangerous because unlike a credit card, you will be left with no money, and won’t be able to use the card until you have sufficient funds in the account. If you are on a cash-only system or only use debit, this could leave you in a bad predicament if you’re not careful.
However, if you are being careful, there are some options out there that make it easy to pay your bills using your checking/debit account without having to write a check or use your card.
If you’ve ever received a Direct Deposit paycheck from your employer, then you’re at least somewhat familiar with ACH payments. ACH, which stands for Automated Clearing House, was started by the National Automated Clearing House Association, or NACHA. It is a system that allows for transfers from one account to another.
ACH debit payments allow you to pay credit card bills or even your utility bills online. This is done by entering your checking account information into a secure online portal or server belonging to the company. Then you authorize a payment, either recurring or one-time only, and ACH will move the money from your account to the business’ account receiving the payment.
It can be a great option if you are someone who has a tendency of forgetting to pay bills. You can easily set up automatic monthly payments to have your bills paid directly from your checking account without worrying about it. The only concern here is if you forget how much you have available in your account, you could wind up paying fees for returned payments as well as overdraft fees if you don’t have enough to cover the charges.
ACH payments have also taken off in the form of P2P, or Person-to-Person, payments. Companies like PayPal began using the ACH payment system years ago as a way to pay for goods and services online. While PayPal also allows for P2P transfers, two other companies have become really well-known for these capabilities, mainly because they don’t charge a fee to transfer money.
Venmo (which is actually owned by PayPal) and Zelle have become the go-to mobile payment services for millennials because of its near-instantaneous transfer capabilities. It allows the money to come directly from your checking account to pay back friends for everything from a coffee run to concert tickets in a flash.
Apply Pay and Mobile Wallets are essentially just a digitized form of your credit and debit cards. The devices use a near-field communication, or NFC chip, to transmit the credit card information you have in your phone to the payment terminal you are using. It requires nothing more than your phone and verification such as your fingerprint (through your iPhone button) to make a purchase.
For it to work, you will need to import whichever credit cards or debit cards you would like access to. Then when you are in a store that accepts either Apple Pay or mobile wallet payments, you can scan your phone and make a purchase. In Apple Pay and some other mobile wallets, you can also transfer funds to a mobile wallet card from your bank account and use the Apple Pay card as a type of prepaid credit.
If you use only credit cards in your mobile wallet, you will have to worry less about the actual money in your bank account. However, you need to make sure you are keeping tabs on your credit card balances. Remember, the interest accrues if you don’t pay your balance off each month.
All of these technologies make it easy to spend money but can make it much harder to save money. To counterbalance these, there are many different budgeting apps available to those looking to keep an eye on their spending habits, as well as even help you save.
One of the most popular budgeting tools has been around for more than 30 years. Quicken is the originator of digitized budgeting and allows you to link your bank accounts, credit cards and more to spreadsheets so that you can better manage your money.
Mint could, in some ways, be considered the online version of Quicken (both are owned by Intuit). You connect your financial accounts to Mint, then it tracks your spending and saving. An added bonus for those looking to save is that it is free to use.
A favorite of many finance websites is You Need A Budget or YNAB. This app requires you to download then upload your financial statement. It does not directly connect to your financial institutions and it also comes with a fee. Still, it’s budgeting hack is that it allows you to live off the previous month’s income and features many similarities to the other options, including spreadsheets and graphing capabilities.
Our favorite option at Debt.com is Tiller. It takes old-school spreadsheet budgeting and makes it hassle free by automating the import of all your transactions. It links to your accounts, then gives you a spreadsheet that you can customize to fit your goals.
There are also options for those who are looking to unconsciously save while budgeting. These kinds of apps hit the mainstream a few years ago and are still around as either an investing tool or as a savings account.
These apps include Digit, which analyzes your spending habits then takes the money you wouldn’t use and puts it into a Digit savings account. Then, when you want the money, you can withdraw it.
Another option is Acorns, which rounds up to the nearest dollar when you are spending and then invests it into an Exchange Traded Fund for you.
Again, all these software and app options are just ways to help you create a budget and stick to it. They can be extremely helpful if you find yourself wandering dangerously close to the edge of debt and need some help to see where your money is going.
If all this technology is proving too complex, the one tried and true way to succeed with budgeting is to go to an all-cash system. While you may need checks to pay bills, you would use cash to pay for all other expenses. Once that cash is gone, there would be no more spending until you reach your next “cash payday.”
Versions of cash-only budgeting include the envelope method and the 50/30/20 method.
The most important thing with all budgeting is that you know where every dollar is going. Once you understand where you are spending, it can sometimes be easier to cut back and reallocate funds to where you might really need it.
It can be hard in this day and age to keep track of where all your money is going, which often leads to overspending and credit card debt. Visit Debt.com’s Money Tips section for more tips on how to save and how to stick to a budget.
Article last modified on May 21, 2019. Published by Debt.com, LLC