Sunday, January 13, 2008

Avoid overlimit, overdaft, and NSF fees, with a money bumper

Today I've got a few really quick tips, that are easy to do (but also can be easy to screw be careful). I was responding to a comment from Mariam at Money Relations, and it reminded me of this simple trick.

If you have a checking account, try this out. Just a precaution, you have to be disciplined not to "add" it as money actually in your account. Think of it as "phantom". Put and extra $100-$200 into your checking account, and FORGET it is there. The key is FORGET it is there. I can not stress this enough, FORGET it is there. Did I mention to FORGET it was there? Deposit it into your checking account, but do not record that deposit into your register. Keep it there as a "bumper". On the chance you might make a mistake in your balancing, you will have a little buffer there, to cover any small overage or miscalculation, and it will save you overdraft/overlimit fees, and NSF fees from the merchant end. The problem a lot of people seem to have with this trick, is they "remember" it is there, and end up spending it. They see something they want, then rationalize the fact they "know" they have the extra money in their account, so they spend it, fully intending to pay it back. But, life usually happens, they forget to pay it back, then they overdraw for whatever reason, and their "buffer" money is no longer there to protect them. Just put it there, and forget it...spend your other money as if you DO NOT have the buffer money there. I know a lot of banks will offer a line of credit (usually like $500) that will cover those overdrafts, but almost everyone I talk to, end up spending it like a credit card, then they keep overspending anyway, plus they now OWE more money. Keep the cash in there, you get the same protection, and if you do spend it, it's not debt.

A little tip on saving that extra money as a buffer, is when you make a purchase, make sure you round up to the next dollar amount when you record it in your register book. Say you buy an item for $4.50. When you write the purchase down in your register book, write it as a $5 purchase. It will keep the $.50 in there as a buffer. This will add up fast...I saved up almost $600 in a year, simply by doing this. Not bad for rounding up a few cents here, and a few cents really does add up quickly.

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