In her must-read book, Worry-Free Money, Shannon Lee Simmons, founder of the New School of Finance, talks about a "spending vortex"—that moment when you feel like your paycheque comes in and it’s already spent before you even get to debate ordering a pizza! We’ve definitely been there before, and it’s beyond frustrating. But it doesn’t have to be that way, and Shannon’s teamed up with Interac to offer the following steps to help us spend in a safer and happier way:
step 1: stop budgeting with 50-plus spending categories. Coffee shops, takeout, clothes, pet, housing, bills—the list goes on. Budgeting like this sets most people up for failure. Shannon’s tip is to stick to just four types of money in your budget: fixed expenses (bills, housing, insurance, minimum debt payments—bills you must pay each month), meaningful savings (money that’s being put aside to improve your net worth), short-term savings (money you ought to be stashing away for emergencies) and spending money (money you can blow to zero on groceries, gas, takeout, clothes, fun and entertainment—the good, daily stuff).
step 2: calculate how much you have to spend each pay period. Once you’ve figured out how much money you can spend each month, Shannon suggests separating it by how often you get paid. For example, if you’re paid twice a month and your spending money is $700, from each paycheque you can spend $350 ($700 halved). "You don’t have to budget this $350," she says. "It’s yours to spend each payday however you wish, as long as it’s within your limit!"
step 3: separate the spending money from the rest of your money. Shannon strongly advises having a separate chequing account for your spending money, as well as sticking to one payment method—namely debit. This helps you set an actual limit to your spending and keep tabs on it so you don’t have to worry about receiving a bill you can’t pay at the end of the month. If you like the convenience of mobile payments, there’s also the option of using Interac® Debit on your mobile device so you can use your phone to pay with your own money. Best of all, she says, since you’re using debit, you don’t have to worry about going over your budget because it’s all tracked in real-time, from your spending money account.
step 4: spend safely and securely. Beyond having a solid spending strategy, ensure the payment method you use is safe. According to Shannon, people really enjoy the convenience of contactless payment technologies—where you flash your debit card or mobile device to pay for everyday items like groceries, take-out or coffee. Knowing that you’re using a safe and secure method to pay is the last step to achieve happy spending. She says “Using a payment method like Interac Flash is very safe because your debit card number can’t be used to make a purchase on its own in store, it has built-in spending limits that are set by your financial institution and EMV® chip processing protects against fraud like skimming and electronic pickpocketing. Lastly, the Interac® Zero Liability Policy means you don’t have to worry about what happens if you lose your card because you are not responsible for losses beyond your reasonable control!”
A final parting smart-spending tip from Shannon: "Once you know what you can safely spend to zero each pay period without jeopardizing your bills and savings, your work is done. I give you permission to spend your spending money without guilt, or a budget!" —Vita Daily
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