I have to admit that maintaining a personal budget is not one of my strong suits. Budgeting is hard when you like to eat out as much as I do. And it seems to me like there’s a new restaurant or food truck opening up every week. However, this hobby makes it harder for me to reach my financial goals. A small consolation is that I’m far from being the only one with this dilemma. Nearly one in three Americans don’t track their incomes and expenses and those who do, find it difficult to stick to their monthly spending budget. But how, you may ask, can I learn to create a budget to manage my finances? And what do prepaid cards have to do with budgeting?
First, let’s take a brief look at the universe of budgeting and what it means to create and maintain a budget. Then, I will mention three ways in which prepaid cards can help you manage your budget.
Creating and Maintaining a Personal Budget
Budgeting is one of the best ways to take control of your finances. Simply put, a budget is a written plan of how you will spend your money and budgeting is the process of creating that plan. You can use this spending plan to set goals and priorities in your spending so that you are able to afford the things that are most important to you. (In my case, finding the best rainbow bagels.) Following a budget plan helps you stay out of debt and ensures that you have money for the things you want, but especially, that you can afford the things you need such as housing, medical insurance, utilities, tuition, etc.
Something essential when creating a budget is to determine your financial status and goals. The first step is to understand your financial present. Look at your available income and your expenses. You should make sure that your expenses are not greater than your income. To be able to find that balance, you need to create a realistic, but strict budget. In the end, your ideal savings rate will depend on your specific, long-term reasons for saving.
Budgeting with Prepaid Cards
Prepaid cards are not credit cards and they are also not traditional debit cards. Even though many of them carry a logo from a major credit card company, prepaid cards are in a class of their own. Because they don’t require a credit check or a bank account, prepaid cards have become popular among parents and students. Yet, anyone can apply for a prepaid card at most financial institutions and for some, it can be a suitable replacement for a traditional debit or credit card. Prepaid cards start with zero balance and must be loaded with cash before being used for purchases, bills, or other expenses. Once the card is loaded, the consumer can use the funds by swiping the card like an ATM or using it any place that credit cards are accepted. And when the balance drops to zero again, you can’t use it until you load some more funds into the card.
The downside with prepaid cards are the fees. Depending on how you obtain your card you may be charged a card purchase fee. There is also a load/reload fee, monthly maintenance fee, balance checks fee, foreign transaction fee, and the list goes on. However, consumers have good choices for low-fee, high-feature prepaid cards.
Regarding your budget, a prepaid card can help you maintain discipline and control spending as it combines the convenience of a credit card with the ability to allow you to set up your spending limit according to your budget. In other words, all prepaid cards have a built-in brake on spending. With this in mind, prepaid cards are a great way to manage your day to day expenses.
Here are three ways to budget with prepaid cards:
1. Save on interest charges by changing from a credit card to a prepaid MasterCard or Visa cards such as the Chase Liquid or the Access 360.
2. Track your spending and receive daily balances via email or text notifications. With an online prepaid card account, you can track your expenses. This way you don’t have to keep all your receipts to see if you are keeping your finances in check.
3. Automate your savings. Some prepaid cards come with savings accounts. For example, the Mango Prepaid Mastercard offers a 6.00% Annual Percentage Yield (APY) on up to $5,000 in savings in its Mango Savings Accounts. Also, you can automate your savings account by setting up an automatic transfer from your debit card account into a prepaid card account.
In conclusion, prepaid cards are a convenient, affordable tool for financial management. Essentially, prepaid cards help you limit your spending by adding only the money you have budgeted for specific spending on the designated prepaid card. First, set aside your recurrent monthly bills (rent or mortgage, water, electricity, internet, childcare.) Second, set what you expect to spend each month on things like groceries, school, clothing, work supplies and also things like entertainment, gym memberships, etc. Lastly, account for special goals or budgets such as upcoming vacations or holiday spending.
So, choose your prepaid card and start budgeting!