Episode 307: Escape the Overdraft Trap: Practical Tips to Avoid Fees and Stress Less
Sign up for our Live Budgeting Workshop: https://www.debtfreedad.com/live_budgeting_workshop_optin
Subscribe to Simplify My Money: https://www.debtfreedad.com/newsletters/simplify-my-money
Overdraft and late fees can feel like a constant drain on your finances, not to mention a major source of stress. If you're tired of living paycheck to paycheck and worrying about making ends meet, know that you're not alone. Many people struggle with this, but there are effective ways to break the cycle.
It's easy to fall into the trap of overdraft fees. Sometimes unexpected expenses pop up, or bills hit at inconvenient times. But with a little planning and some smart strategies, you can take control of your money and avoid those unnecessary charges.
Here are some practical tips to help you escape the overdraft trap:
- Map Out Your Money with a Calendar: A simple calendar can be your best friend when it comes to managing your bills. Whether you prefer a paper calendar, a wall calendar, or a digital calendar on your phone, mark down your paydays and all your bill due dates. Set reminders a few days before each due date to ensure you have the funds available.
- Prioritize Your Spending: When money is tight, it's crucial to prioritize essential expenses. Focus on necessities like housing, utilities, transportation, and food. Remember, these essentials should always come before payments to creditors or credit card bills.
- Open Communication is Key: If you're facing financial difficulties, don't hesitate to reach out to your service providers. Contact your utility company or bank to discuss options like adjusting due dates or setting up payment plans. This can provide some breathing room, especially if your paychecks don't align perfectly with your bills.
- Pay Early and Save: For accounts that accrue interest, such as credit cards and loans, aim to pay your bills soon after the billing cycle closes. This simple habit can significantly reduce the amount of interest you pay, freeing up more money in your budget.
- Explore No-Fee Banking Options: Consider switching to a bank account that doesn't charge monthly maintenance fees or overdraft fees. While these accounts might decline transactions if you have insufficient funds, they can help you avoid unnecessary banking fees.
- Divide and Conquer Large Bills: Break down larger monthly payments, like car loans, into smaller weekly payments. This approach can help you distribute your funds more evenly throughout the month and avoid depleting your account all at once.
By implementing these strategies, you can take control of your finances, avoid overdraft and late fees, and build a more secure financial future. Remember, it's a journey, and every step you take towards financial freedom is a step in the right direction.
To learn how to take the stress out of your finances so you can breathe again, follow this link: https://www.debtfreedad.com/lwp-masterclass-opt-in-page-podcast
After Show Notes
Resources Mentioned
The Totally Awesome Debt Freedom Planner https://www.debtfreedad.com/planner
Connect With Brad
Website- https://www.debtfreedad.com
Facebook - https://www.facebook.com/thedebtfreedad
Private Facebook Group - https://www.facebook.com/groups/lifewithoutpayments
Instagram - https://www.instagram.com/debtfreedad/
TikTok - https://www.tiktok.com/@debt_free_dad
YouTube - https://www.youtube.com/@bradnelson-debtfreedad2751/featured
Thanks For Listening
Like what you hear? Please, subscribe on the platform you listen to most: Apple Podcasts, iHeartRadio, Spotify, Tune-In, Stitcher, YouTube Music, YouTube
We LOVE feedback, and also helps us grow our podcast! Please leave us an honest review in Apple Podcasts, we read every single one.
Is there someone that you think would benefit from the Debt Free Dad podcast? Please, share this episode with them on your favorite social network!
Transcript
Kati:
Do you have trouble with overdraft fees? Are you constantly praying that your paycheck deposit hits before that next bill payment clears your account? Are you always paying late fees? Before I started to focus on paying off my debt and getting my finances in order, I was the queen of overdraft and late fees. Stay tuned to hear how I got out of the vicious cycle and gained back control. Stay tuned to hear how I got out of the vicious cycle and gained back control.
Kati:
Thank you for listening to the Debt-Free Dad podcast, where we help everyday, normal people like you take control of their finances and live a happier, less stressful life. I'm Katie, your host for today's episode, and I've been on my journey to debt freedom for about six and a half years, and I've paid off over $196,155 in student loans, car loans, medical bills and credit card debt, all on a single income In 2018,. One of the reasons I knew I needed to take control of my finances was after a conversation with my best friend, who also happened to be my banker. I was always floating payments, submitting a check or online payment, knowing full well that the funds were not in my bank account, but praying that my paycheck would deposit early or at least before that bill payment hit the account. I was so anxious and stressed by this game of roulette that I had asked my friend if she could deposit $20 in my account to avoid yet another overdraft fee, and I'd pay her back once my paycheck was deposited. I even said why do banks charge so much in fees if you go over, when we both know there's no money in there? Her response it is expensive to be poor, and when you're playing this game with your money, you will continue to dig yourself deeper into debt. That was also the point where she checked my account history and asked do you realize you've paid almost $500 in overdraft fees this year? And it was still summer, wow, nope. I knew it was a regular occurrence, but hearing that number really made me cringe. That could have been a car payment or a good portion of my rent for the month, not to mention if my bank was rejecting the payment. I was probably also getting hit with another fee from that utility or merchant for insufficient funds, return check or late fee, and that snowball quickly turns into an avalanche.
Kati:
Here are some suggestions to help you if you're also having trouble with fees. If you're dealing with late fees all the time. That's one of the easiest to control setting up automatic payments so you know your bills are paid on time. But I know this can be a struggle if you're not sure how much money is always in your account. So my first suggestion get yourself a calendar, whether it is a paper planner, a wall calendar or the digital calendar on your phone.
Kati:
I've evolved from the paper planner to digital over the years. First, mark down your paydays and approximately how much money will be going into your account on that day. Second is going to take a little more time going through all your bills and writing the amount due on the date it's due on your calendar. And if all your bills are paperless and you get emails with your monthly statements, do not delete or file that email until it has been added to your calendar. This might take some getting used to at first, but it ends up being pretty quick and easy in the long run. If you're using a digital phone calendar, you can set up reminders or notifications. So I set up the due date in my calendar and then I like to set a notification for two days prior to the bill being due to make sure I check that I've set up the payment to go out and confirm the money is in my bank account.
Kati:
If you're doing your Roots 15, our daily 15-minute check of your finances, this is the perfect time to kind of look ahead in your week and check what's going to be coming in and what's going to be coming out of your accounts. Next, if you're looking at the paycheck coming into your account and adding up the bills that will be going out and the bills are more than the income this is when you really need to take a serious look at what is going out. So, number one always prioritize the necessities your home, so your mortgage or rent utilities, your car if you're getting to and from work, and food. Of course, credit card payments should never be a top priority over shelter and sustaining you and your family. If you need to move some things around. Number two call your utility company or banks and ask if they're willing to work with you to change a due date on a bill or set up a payment plan. For example, your mortgage and insurance might be due the first of the month and that means things are tight until your next paycheck. Ask if you can get a due date after the 15th if you get paid mid-month. Give yourself a little bit of breathing room and some may help, some may not, but if you don't at least ask, the answer is always no may not, but if you don't at least ask, the answer is always no.
Kati:
Number three guess what? You don't have to wait until the due date to pay a bill. In fact, if it is a bill on an account that also charges you interest, such as a credit card or a loan, you actually want to try and schedule a payment to be as soon after the billing cycle closing date as possible to avoid paying more interest. So, for example, on this random bill that I pulled from my credit card, the billing cycle ended August 26th and that due date for the payment was September 20th. So instead of waiting all the way until September to pay that bill, I actually want to pay this as close to August 27th, the day after the statement closes, or soon after that date, because then I'm cutting down on that accruing interest, since I wasn't able to pay off the full balance for the month yet, and that means it's coming out of my August budget and not my September budget. This one actually took me a while to kind of wrap my head around. It actually took until I started working for a bank and seeing this on a daily basis to really understand how interest and trailing interest works. And I'm in my 40s.
Kati:
Number four get a bank account that doesn't have fees. And yes, they do exist. These are mainly online banks, like Vero or Ally, and they don't charge a monthly account maintenance fee or overdraft fees. Now you have to remember if you don't have the funds in your account, these banks are still going to decline that payment from going through. So you need to remember that you might still be charged a return check or insufficient funds fee from that merchant or utility. Or if you're standing in the store trying to swipe your debit card, it's going to get declined. But it has helped me manage my money better and not keep running into those fees that just pile up over time like I did in the past.
Kati:
And number five when I first started Roots, I was getting a $400 weekly paycheck, which also gave me the idea of splitting up my bigger bills that were due every month, like my car loan payment, so that it wasn't such a big hit to my account.
Kati:
My car payment was $500 a month and so I would divide that by four weeks in the month. I got paid every Thursday, so I set up a weekly Friday payment of $125 paid towards my loan. That freed up my funds throughout the month for variable costs like gas and groceries when I needed them, instead of having to remember oh, save up $500 this week and next week to make my car payment and then be really tight and stretched until my next paycheck. I've done this with my student loans, rent and other larger payments over the years and it has reduced a lot of stress on me and my budget. Now, if you've been struggling with late fees or overdraft fees, I hope that some of these ideas can help you break the cycle and get some solid footing to make progress along your journey to get out of debt Until next time. Thank you so much for tuning in to the Debt-Free Dad podcast.
