Spending to zero

[retinadoc]

I hear you, but I think a sense of proportion is reasonable.

The most money at risk at any time is the money in that linked bank account, so $6000 in my case. Also, the bank doesn't really have a say in the matter of whether they want to reimburse you or not, if you report the loss within the specified timeframe, they have to credit your account within 10 days. That's the law. I think if this account had all of my cash, that would be rather risky since I'd be completely illiquid during that time. But we have a debit card for our main bank account that we can use, and of course a few credit cards that we use as needed (e.g. Amex Plat when we want bulletproof purchase protection).

[artemis]

If you keep the amount of money in the account you access via a debit card fairly low, I agree that cuts the risk considerably.  Just make sure you have enough in another account to cover the basic bills should you need to!

(Why cancer is not yet cured:  the folks determined enough to do it are spending their time compromising other people's bank accounts instead!  Imagine the good they could do f they just turned their talents toward honest work instead of theft...)

[Craigy]

retinadoc wrote:

I hear you, but I think a sense of proportion is reasonable.

The most money at risk at any time is the money in that linked bank account, so $6000 in my case. Also, the bank doesn’t really have a say in the matter of whether they want to reimburse you or not, if you report the loss within the specified timeframe, they have to credit your account within 10 days. That’s the law. I think if this account had all of my cash, that would be rather risky since I’d be completely illiquid during that time. But we have a debit card for our main bank account that we can use, and of course a few credit cards that we use as needed (e.g. Amex Plat when we want bulletproof purchase protection).

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That's still 10 days where they have a person review things and make a decision.  Also I believe with a debit card they can assess you some sort of charge or fee if you don't catch it soon enough.

For someone like you or me though, yeah it's definitely not the end of the world being out some money for a couple weeks.

 

[nachos31]

Craigy wrote:

I will second Zaphod and say that I prefer credit cards for the protection, and the rewards are a nice bonus.

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+1. While I understand OP's intention that using a debit card immediately draws down on the checking account balance so there's "immediate awareness" of spent money, I do think the protection of credit cards is way better than debit cards--see Craigy's point above--and the rewards are just icing on the cake.

OP is already checking his/her bank app to see the balance, is it really that much harder to check the bank app and the CC app and do simple arithmetic to figure out how you have left for this spend to zero plan?

tex wrote:

All purchases on credit cards, all paid off every Friday.

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I like this idea. This method could also work for OP if he/she made the switch from debit to credit card.

[Zaphod]

nachos31 wrote:

Craigy wrote:

I will second Zaphod and say that I prefer credit cards for the protection, and the rewards are a nice bonus. 

Click to expand…

+1. While I understand OP’s intention that using a debit card immediately draws down on the checking account balance so there’s “immediate awareness” of spent money, I do think the protection of credit cards is way better than debit cards–see Craigy’s point above–and the rewards are just icing on the cake.

OP is already checking his/her bank app to see the balance, is it really that much harder to check the bank app and the CC app and do simple arithmetic to figure out how you have left for this spend to zero plan?

tex wrote:

All purchases on credit cards, all paid off every Friday. 

Click to expand…

I like this idea. This method could also work for OP if he/she made the switch from debit to credit card.

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Once you understand the point and budgeted amount though, I dont get it. Its like training wheels, you need them until you get it then you dont. I mean the OP thoroughly understands and has his game on lock down, he absolutely doesnt need this at all. Anyway, whats the difference, your money is really one big pile, transactions are easy to keep track of, etc...I just dont see the difference besides lost protection, benefits, etc...

I also dont get the idea of paying CC off every friday for the same reason. What exactly is the point? It doesnt save money and certainly is a hassle. If you need to review purchases weekly you can do that and mint sends me an email every week with that kind of info.

I dont have a single bill that I need to physically log on to a page and manually enter to pay. Everything is on auto pay, all cc just pay the full amount on date, etc...etc...it is not only hassle free but means you are highly unlikely to ever miss a payment on anything. Its also easy to use an aggregator at that point to track if you want to. There are enough hassles and wasted time in life already, Im not going to create more friction where its absolutely unnecessary for any longer than I have to. Yes, great idea for just starting out, but once you get it, streamline your life and keep tabs.

[retinadoc]

I'm not sure how rigorous this research is, but there is evidence that if you use physical cash versus a credit card, you will spend less due to the "increased pain" of a cash transaction.

Now, there is no way I could switch to cash only -- I hate carrying change. But, do you think that you spend less when you use a debit card versus a credit card? My theory is that you do, because your spending awareness is increased.

Obviously, we are all relatively high earners and we don't need to pinch pennies everywhere. I agree that this is "training wheels", but it forces me to spend more consciously. Thanks for the feedback!

[Zaphod]

retinadoc wrote:

I’m not sure how rigorous this research is, but there is evidence that if you use physical cash versus a credit card, you will spend less due to the “increased pain” of a cash transaction.

Now, there is no way I could switch to cash only — I hate carrying change. But, do you think that you spend less when you use a debit card versus a credit card? My theory is that you do, because your spending awareness is increased.

Obviously, we are all relatively high earners and we don’t need to pinch pennies everywhere. I agree that this is “training wheels”, but it forces me to spend more consciously. Thanks for the feedback!

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Yes, but the same research says any card is not seen as cash, meaning debit cards as well. A card is a card is a card and is not cash, its a step removed which is enough to dull that pain. I personally have zero problem seeing them all the same, again, once you get the general idea I really have a hard time that you cant just apply it fully to your whole life. Makes no sense to me.

Total aside that has zip to do with topic....as we move more and more cashless this matters less. In the US I would say we are already at a point where the younger generation sees them as equal. Its a generational thing and something you're indoctrinated into believing as cash was the only thing around, of course its more real. As you grow up without any cash around hardly, cards will be how you view money. These things will constantly change and the next generation will see their phones as how they pay for things. Those kind of trends are interesting, whole shifts in how people think.

 

[VagabondMD]

nachos31 wrote:

And I thought I was going to be regaled with a tale of spending down retirement funds all the way to zero.

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That's what I was hoping for. Years ago, I read a book titled, "Die Broke" which discussed this subject matter and promoted the strategy.

[Kamban]

nachos31 wrote:

And I thought I was going to be regaled with a tale of spending down retirement funds all the way to zero.

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Exactly. I would like to hear how to spend retirement savings to zero.

 

As to the original topic, I am not sure that after savings I want to use the SPEND account to spend it to zero. We spend what we need to spend. On some months more and on some months less. And most of the times we don't spend as much as we think we do except on vacations. If we have extra money more than we need we just save it.

[Kamban]

The only debit cards I have are those from the banks that have combined ATM and debit cards into one. And we use it just to withdraw foreign currency when we go abroad for vacations.

For 99% of our transactions we use a credit card or by online payments. the remaining 1 % we pay with cash.

[nachos31]

Not sure where the quote function is on my phone, but Zaphod said: "I also dont get the idea of paying CC off every friday for the same reason. What exactly is the point?"

The only reason I like this idea is bc it might be pertinent to my situation where I will likely be purchasing a home sometime this year. I think it was adventure who posted in a thread I started that for mortgage applications they look at credit card utilization based not on whether you carry a balance but on the balance listed on the statement. If that is in fact true, then the approach mentioned above would help limit the statement balance.

[Zaphod]

nachos31 wrote:

Not sure where the quote function is on my phone, but Zaphod said: “I also dont get the idea of paying CC off every friday for the same reason. What exactly is the point?”

The only reason I like this idea is bc it might be pertinent to my situation where I will likely be purchasing a home sometime this year. I think it was adventure who posted in a thread I started that for mortgage applications they look at credit card utilization based not on whether you carry a balance but on the balance listed on the statement. If that is in fact true, then the approach mentioned above would help limit the statement balance.

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Thats not true, and seriously it should not matter at all whatsoever. For reference I spend 99% of all our money using credit cards, and bought two houses within a year. On your D/I you have a ratio, but the way they determine your likelihood to be able to pay is to run them as a monthly cash flow, ie, the minimum monthly payment. If they really wanted to know how you handle the balance they could see that as well, but they wont.

I cant see how that would be a game breaker anyway, if you were so close to getting denied you probably shouldnt be buying a house. We may feel like we are at some barely threshold but I've found the banks to be pretty forgiving with these mortgages. I also started with nearly 500k in student loans so I wasnt in some crazy great position d/i wise.

If you were super concerned about it I would just pay them before you apply, but again, should not matter in the least.

[scbunker]

On debit cards being more risky than credit cards: this is true.

I don't use it, but I've heard good reviews of Debitize. You like your credit cards, and the service automatically transfers your credit card balance from your bank account to your credit card account daily. Thus 'debitizing' your credit card. This way you get the rewards and security of credit cards without the disassociation from cash. Interesting concept, I think.

I likely won't use it because I like the float.

[Zaphod]

NotADoc wrote:

On debit cards being more risky than credit cards: this is true.

I don’t use it, but I’ve heard good reviews of Debitize. You like your credit cards, and the service automatically transfers your credit card balance from your bank account to your credit card account daily. Thus ‘debitizing’ your credit card. This way you get the rewards and security of credit cards without the disassociation from cash. Interesting concept, I think.

I likely won’t use it because I like the float.

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Again, just make the mental connection and do it normally (I realize you do). I guess I just dont get how its an issue. Once I understand the idea, playing games to keep myself engaged in appropriate behavior makes no sense to me. What the heck is the difference between paying monthly and paying daily? There is no difference except your perception. If its your perception that is the problem, make the link and change it.

Its the same poor logical reasoning that says youre better off paying down a student loan or mortgage because you cant be trusted to invest because youll just spend it, when it makes no sense that if you cant be trusted to do that you will actually pay extra towards the loans. I try to let this stuff go most of the time, but seriously the people here are smart and motivated and are really discounting themselves unnecessarily.

Agree its a good start for a newbie, but not once you understand the game.

[Craigy]

Zaphod wrote:

Total aside that has zip to do with topic….as we move more and more cashless this matters less. In the US I would say we are already at a point where the younger generation sees them as equal. Its a generational thing and something you’re indoctrinated into believing as cash was the only thing around, of course its more real. As you grow up without any cash around hardly, cards will be how you view money. These things will constantly change and the next generation will see their phones as how they pay for things. Those kind of trends are interesting, whole shifts in how people think.

 

Click to expand...

WSJ article today said that last year (2016) was the first year where total retail card transactions exceeded retail cash transactions.  Presumably reported transactions, though perhaps they account for some off-the-books estimate too.