Conscious Growth.com

May 10th, 2008

Overdraft charges result from poor money management. They are clear indications that you need to be more conscious of your spending. Overdrafts happen for two reasons: (1) spending more money than you have or (2) failing to monitor the flow of your money. With a smaller budget, these pesky charges can destroy any progress you’ve made.

To be free of overdrafts, you need to address both issues. Over-spending is a problem for most people. They simply try to live a lifestyle they can’t afford. They portray an image of success while drowning in overdraft fees, maxed out credit cards, and over-priced car and house payments. So once you know your digging a hole, stop digging.

Managing the flow of money is a bit trickier. Often times, overdraft charges can sneak up in forgotten checks or overly swiped cards. To help you grow in your ability to manage your money, try applying some of the following tips:

Limit your Activity

Use your bank account as little as possible. The less transactions you make, the easier it is to monitor. So figure out the bare minimum and sort them by withdrawal, paid bills, and paychecks. For me, it’s the following:

• 4 - 5 ATM withdrawals a month (taken out at the first of the week)
• 5 - 10 Paid Bills (rent/mortgage, water & sewer, cable, phone, car insurance, etc)
• 2 - 3 Paychecks (work, residual income, special events, etc)

If you have excessive withdrawals, you can lower activity by switching to a cash budget. You still actively spend money, but your bank statement only shows four withdrawals a month; at the first of each week.

You can also stop carrying plastic with you. It’s easy to rationalize spending money you shouldn’t when you can access it with the flick of the wrist. It’s a lot harder when you’ve only got cash. When you run out of it, you know immediately.

Anticipate Clearing Dates

Each time you write a check, you extend a promise of future payment. Your check remains outstanding until the clearing date; when the money is taken from your account. To not lose sight of this gap, keep a running list of any checks, debits or auto withdrawals that haven’t cleared. Also, add any upcoming bills to this list.

Date Paid/Due - Payment Type - Bill - Expected Clearing Date - Status ——————————————————————
May 23, 2008 - Check # ???? - Cell Phone - Exp: May 27, 2008 - Waiting
May 17, 2008 - Auto Withdrawal - Car Insurance - Exp: Same Day - Waiting
May 09, 2008 - Check #2322 - Mortgage/Rent - Exp: May 14, 2008 - Paid
May 04, 2008 - Check #2321- Water & Sewer - May 10, 2008 - Cleared

Daily Monitoring

Most banks allow you to sign up to view your account online. My online account shows cleared items and some pending ones (if it’s used on a debit card). Every morning, check your statement online and review your list of anticipated clearing dates to keep in mind throughout your day. It’s a simple exercise that shouldn’t take more than a minute.

Learn from the Past

Pull up your last few months of bank statements (mailed copies, online, direct from the bank) and look for any destructive patterns. See how previous overdrafts could have been avoided and circle any frivolous spending. Look for what your essential withdrawals, paid bills and paychecks. You may need to update some of your lists. The point of all this is be make better financial decisions by being more aware of your spending.

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