ATM: Always Taking Money.
Now that my 2016 spending is fully exposed, I have to admit an embarrassing oversight I discovered while I was crunching the numbers. The ATM seems like a helpful resource, but is really a wolf in sheep’s clothing.
I spent the last couple weekends tallying my spending using credit card and bank account statements. Sounds fun, right? I figure once I establish a regular habit, 20 minutes of entering numbers into a spreadsheet each month will be worth the retroactive time-suck of tracking down the past three years of statements.
After hours of meticulous accounting, I discovered my expenses-by-category didn't add up. Roughly $2,400 exited my checking account each year that did not show up on my credit card statement.
Enter: the curse of the ATM withdrawal.
Then it hit me. Without any conscious thought, I withdraw $100-$200 when I need cash. Our town's one-room western movie theater doesn't take plastic, nor do many small businesses or farmer's market vendors in rural Colorado. When I travel sometimes I forget to go to my bank ahead of time, so I'm slapped with the $3.50 ATM charge, in addition to a $3 non-Wells Fargo transaction fee. I discovered there's a $2 non-WF balance inquiry fee on top of that! So, when I visit the ATM, possibly twice each month, I waste upwards of $16. Over the course of a year, that adds up to $192.
Now I'm at $2,400 of unaccounted spending EACH YEAR! On a salary of $32,000 that is a significant percentage of my annual income (8.1%), $200 of which is vanishing into the vacuum of bank fees. What really irks me is I don't know which category my spending falls under - is it coffee or gas? Entertainment or food? When I made the goal of conscious spending in order to retire in 10 years, I failed to acknowledge how difficult that would be if I allowed myself the ability to remove my hard-earned dollars occasionally from a money box available on every corner. Those occasions add up.
I see three potential ways to fix my embarrassing oversight.
Stop using cash altogether. Can I barter Mr. G&G's wild-caught salmon for movie theater tickets?
Withdraw $200/month and keep track of expense categories.
Follow Dave Ramsey's cash-only method.
Ramsey has been around the personal finance world for two decades. He hosts an extremely successful radio show and has authored several best-selling books that recount his boom and bust lifestyle and what he learned from gaining and losing millions. His Total Money Makeover is a simple recipe for getting out of silly debt, like payday loans and financing furniture or a boat. It doesn't go much beyond testimonies of nice families learning to apply his 7 Baby Steps, but his book is directed at an audience in need of Kindergarten Finance. Logically, they need to take Baby Steps. Here at Green & Green we are more focused on Finance 101, but everyone has to start somewhere.
Ramsey does make a point; by budgeting and only paying in cash, you are more likely to protect the physical bills in your wallet. By using a card you are more likely to hand it over without much connection to your money. Cash-only is not a likely transition for me to make, as I do benefit from travel points, but it does reinforce the mind's influence in saving. I won't be using the cash only method, but if you're just beginning it could be an interesting experiment.
The psychology of money is a ripe topic for another post, but for now I think I'm able to connect the dots between my Visa and bank account in my head. I've equated the plastic in my hand to hard numbers since I've paid my own credit card statements, in my own name, beginning at 17. When I look back at my college classmates who swiped daddy's card I think of the disservice they were handed by not learning this connection earlier. But hey, I'm the idiot racking up $200 in ATM fees. We all have to start somewhere!
After much consideration (not really) Option #2, a regular monthly withdrawal and tracking expenses is the winner!
I'm confident ATM debacle will not be my last oversight, and I hope you can keep an eye out for similar snags. If you have your own tips for navigating cash only vs. ATM share your comments!