Here’s How to Preload Your Spending

Leave Overspending in the Dust

When I turned 50, I celebrated with a trip to Hawaii with my girl friends. I knew I wanted to limit my spending, but it’s a lot easier to overdo it when you have your vacation goggles on. My simple solution was to only bring the amount of money I budgeted for the trip — nothing else. It effectively forced me to stick to my budget — and helped me avoid any regrets after the fantastic trip.

I was pre-loading my spending, a classic method to make sure you don’t overspend. It’s simple, but it’s not necessarily easy — we’re a consumer society, and many of us are bombarded with advertisements every hour telling us to spend more. But pre-loading is worth it. “If someone has financial goals — or even goals in life — overspending will potentially derail those goals,” says Chris Chen, wealth strategist. Here’s how to take control of your finances.

Use separate accounts.

It’s easier not to touch your money when it’s in a separate account from the one you spend with regularly. Talk with your bank about setting up separate accounts just for savings for holiday gifts, for a specific vacation or anything else you’re aiming to save for. Many credit unions and savings banks will let you do this without any extra account maintenance fees or charges. If you belong to a big bank, ask them the base amount you’d have to have in the account to avoid the charge, or try negotiating the monthly fee. Another option for keeping your spending in check is having two checking accounts — one for fixed expenses like rent, utilities and other monthly bills, and one for discretionary expenses like entertainment, says Chen. Make sure the discretionary spending account is the only one with a debit card, and then — this is key — set it up so that when there’s no money left, your card gets declined. This will make overspending pretty difficult.

Try potential expenses on for size.

Now it’s time to put those specific earmarked accounts to use. If you’re planning on buying, say, a car with a $250 monthly payment, put that money in an account called “Car” and see how you actually fare without that money each month, rather than using the common “purchase and pray” method, says Carl Richards, CFP and The Sketch Guy for The New York Times. It’s a good way to see if you can really handle the expense without the high stakes, and you’re saving at the same time (after three months in this example, you’d end up with $750 to put towards the down payment). An added perk? You’re giving yourself time to think about the purchase, meaning you won’t spend on a whim.

Use credit like debit.

One quick way to get into credit card debt is to think of your credit like free money. You can get around this way of thinking by keeping track of every dollar you charge and making sure you have enough in your checking account to pay it off at the end of the month. If that’s not your strong suit, consider using an app like Debitize. It links your existing checking account with your credit card(s), and any time you make a purchase, it automatically withdraws the funds to cover it (and pays it off for you within a day or two). At the end of the month, your balance is already paid. Another perk? The app makes an extra payment right before your credit utilization is reported to the credit bureaus, bringing it down to 1 percent of your credit line.

Jean Chatzky

Jean Chatzky