By Jennifer Boutwell, VP Marketing, InComm
The holidays are over and the December bills are starting to hit. January’s expenses keep coming and February is looming. It’s no surprise that January is designated “Financial Awareness Month.” One common theme these days is people trying to control their weekly expenses in order to budget their money better and help get out of debt. Everyone is familiar with the frustrating cycle of deciding to stick to a budget, only to see their best intentions fall away due to an inability to control spending.
Fortunately there is a key tool that most people are aware of, but haven’t been properly utilizing, which can combat this vicious circle and help control day-to-day expenses – prepaid cards.
Creating a set weekly budget and sticking to it is one of the best things people in debt can do to control spending. By getting spending under control, they’re able to stabilize how much money goes out and start saving in order to raise themselves out of debt.
But how does one control spending?
Often times people struggle to properly stick to a set weekly budget (e.g. $200 per week), especially when it’s so easy to walk into a store with the intent of only spending $40 and end up leaving with $90 worth of unnecessary items. Another core challenge people face is being unaware as to how much they’ve actually spent over the course of a week. This lack of basic information about how much they’re spending can lead to budgeting goals going out the window due to runaway spending.
Enter the prepaid card. Prepaid cards provide users with an outstanding tool for both controlling how much they spend when they walk into the store, and monitoring how much they’ve spent over the course of a given week.
Let’s take a look at the above situation, only this time utilizing a prepaid card. As one walks around the store, they may see $90 worth of stuff that they WANT, however they only have $40 on the card, so they have to prioritize and only purchase exactly what they NEED.
As the week goes on, this continued check on spending helps reduce the budget-killing “impulse spending” that everyone is tempted with when they enter a store. By only having a set amount on a prepaid card, they are forced to prioritize not only during that one trip, but throughout the entire week.
Equally as important, once all the money on the card has been spent, they need to reload it with more money before it can be used it again. This provides a specific record throughout the week of exactly how much has been put on the card, enabling them to see where they stand in relation to their weekly total, and empowering them to better plan necessary spending for the remaining days.
Great; but how does one build a weekly budget incorporating prepaid cards?
Building a weekly budget may sound intimidating to those who’ve never used one, but fortunately they’re actually simple to create. Here are some easy tips to help build a weekly budget:
1. Over the course of a two-week period, carry around a little notebook and make a quick entry every time a purchase is made. This can be lunch, groceries, gasoline, going the movies, etc.
2. At the end of each week, add up the total and group them into three main categories: food, gasoline and personal expenses.
3. Review the figures from both weeks in order to get a general idea of how much was spent in each of the three above categories, as well as how much was overspent by buying more than was needed.
4. From that review, decide on the weekly amount for the budget.
5. Go to any major retailer, get a prepaid card from a reliable distributor like InComm and put $50 on it.
6. Start using the prepaid card for your weekly expenses and then reload when necessary.
Why $50 at a time? This is done to prevent the “impulse spending” discussed earlier and maintain an overall weekly budget goal. Make sure to incorporate the nominal fee charged for reloading into the final budget target.
Using prepaid cards not only eliminates ruining weekly budgets through impulse spending, they also provide the ability to track exactly how much has been put on the card as the week goes on.
Despite the ongoing economic slowdown, by incorporating the budgeting tactics laid out above, anyone can get their spending under control and better budget their expenses in 2011!
Additional information about InComm is available at www.incomm.com.