Where’d all my money go? And word of the week
A very bad thing happened to me recently involving my debit card, a few slow to process transactions and a very angry bank. A while back I had made a few purchases for the start of school and for whatever reason, they all took a very long time to show up on my account. They started slow — maybe one a day — then suddenly BAM! They all processed, and I had no idea. So I went about my business and bought a coffee for $1.89. Long story short, that coffee actually cost me $31.89. I had overdrafted on my account.
Wonderful.
After a few angry calls with my bank concerning the notifications I’m supposed to get if my account falls below a certain amount, I got some good advice: step up a cash reserve account (money set aside to keep you from going in debt (overdrafting for instance) in the case of an unexpected expense). Sounds like a no-brainer to me. One blog suggested keeping 6 months worth of living expenses in a reserve account, but said the downside of this is you could make interest if you put it elsewhere.
But for those of us in college, a reserve account with a hundred bucks or so should suffice. Needless to say, I set up a reserve account, because I’m never spending $30 for coffee ever again.
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Feed for Two Cents
Ouch! That is pretty expensive coffee. I know some people who put a couple extra hundred dollars in their checking account, but they balance their books as if it isn’t there. That way when they think they have $200, they actually have $400 and this gives them a bit of flexibility.
Another idea is to use a credit card, but track it like you would a checking account balancing the amount you spend against the amount in your bank account. If you have the discipline this can work well but don’t try it unless you know you will keep track of things very carefully.