I have had some fun with a few over-the-top ideas for those who are chronic over spenders (i.e. their internal shock collars seem to have gone off-line). I have thought about services that banks might offer worth their exorbitant monthly service charges.
What is needed is a system that:
- Sends spending alerts to your smart phone when you make a purchase. Sends your spouse an alert of what you have spent and an itemized bill of what you bought. Most credit cards will do this now.
- Updates are sent to your PC or Cell phone warning you when you are close to over-spending on a specific budget category. Useful to know if you have overspent on clothing this month.
- Causes your credit card to explode if over used. Maybe instead, it disables the credit card and forces the user to call with a specific pass code to have this lock-out overridden. Given most credit cards have a credit limit you’d think this simple. Most cards will usually just raise a users limit.
- Allows you to set up a “budget” for the month on-line which you can easily monitor. Maybe get daily and weekly reports on how your progress works
- Send a large wrestler or MMA fighter to your house to go over your monthly spending habits. If they feel you are not following the plan, put you in the sleeper hold? Maybe the bank sends over a financial advisor the first time, to discuss these points. They could show you a picture of the wrestler, pointing out what might happen if they don’t follow the plan.
- Rewards the consumer with a higher interest rate on their savings, or a lower service charge for each month that the consumer follows the financial plan. It is important that you must give positive feedback some times.
- Offer a points reward system that you can redeem for various rewards like Air Miles or such, thus creating a Rewards system for people who save instead of a system to reward spending that are currently in place.
Worth a Service Fee?
If a bank offered this service, I might view that as a good use of my money if I had to pay for the service. I don’t think I’d use this service (although I might try it out for a while). This might be what some folks might need, almost a Financial Nanny or Money Conscience concept. I copyright both terms.
Do most people need this kind of service? Maybe not, but it is evident that some folks might benefit from this useful concept.
Some banks already offer parts of the service by giving their customers access to cheaper or free copies of Quicken to help track their spending. Still, the financial feedback loop needs to be much tighter than Quicken’s control (and maybe needs to be a little more severe in its ramifications as well).
Is This Really Needed for Chronic Over Spenders?
Is this kind of interventionist methodology needed? My opinion is, in some instances, yes because there is a shocking lack of financial training for consumers. Money and manipulating it is one of the top skills any adult needs to survive in this world, yet the amount of training given to teenagers and young adults is negligible.
Maybe Mint or Quicken will offer something like this? It already does but without the notifications. It sounds like something Apple Pay could implement quickly.
Your fifth bullet (the wrestler enforcement method) has been done for smokers:
This video is a little over the top, I’d like the punishment to be a little more subtle.
@BigCajunWife: Pay all the necessary bills (ie those that benefit all parties), then split what’s left in two. Since both have clearly agreed to balance fiscal requirements with the requirements of raising a family and both are working full-time, this is the most fair.
It will also remove the potential for one feeling powerful and one feeling powerless. For major expenses, like cars, renovations, appliances, both parties will need to contribute to the initial cash investment and therefore decisions will by necessity will have to be joint.
The only situation in which this will not work, I guess, is where the sole earner is a very high earner. In those cases, I suspect lawyers have already figured out how things will get divvied in a pre-nup.
Since my spouse will have some income from RRSP’s, this is essentially what we will be doing after retirement: pooling the financial resources, taking care of the bills, and splitting the rest. This is something we discussed quite some time ago.
Don’t pool your money.
Pool your expenses and make a joint account for the expenses like housing and utilities.
The rest of your money is your money and if you spend it in a wrong way that is your problem.
Stay-at-home spouse is another thing. This situation is a choice made by both parties in the couple. Usually it’s for the kids and that is a great thing. That said … one income families are in a harder financial situation because we all know that in 2010 two incomes are easier to manage than just one.
Good idea for dual income families where each earner is potentially self-sufficient. How would you suggest married couples with a stay-at-home spouse deal with things?
I am amazed at how much of the ‘money arguments’ stem from the fact that married couples have joint accounts and pool all their money. I went through this in my first marriage. It was awful.
Now, in my second marriage, we divide all the joint bills in the same proportion as each earns in relation to the total household income. Anything left over is for each of us to handle as we see fit, kept in our own account(s). When something comes up that is major that we want together, we discuss it and agree on what is to be bought.
I don’t have to justify my digital device addiction to my spouse and my spouse doesn’t have to justify her hobby-related purchases to me.
I think the idea of sending a tweet or phone message to the spouse is an interesting idea. Based on the current trend of debt and money related TV shows, communication or lack thereof is a large part of the issues that couples have with debt. The common excuses of “I don’t know how much money we have, so how should I know when to stop spending”, “I work hard for my money, so I should be able to spend it” or purchases being hidden from the other spouse who doesn’t find out until the credit card bill comes (some people hide that too!) are more commom than not.
I would definitely think twice if my spouse knew instantly what I had just bought, for how much and what store. Maybe they can go one step further, and the minute that credit card chip enters a store the notice is sent. Nothing like receiving a call from your darling husband or wife saying “I know where you are, GET OUT of the car dealership!”
Many people desperately need a shorter feedback loop to induce psychological pain quickly after overspending, but the banks would never offer a way to do this without being forced to. People who can’t control their spending are hugely profitable.
Sadly you are correct, no bank would offer this service and if they did, they would do a very bad job.
Very true…there are some instances that this kind of services is needed. Personally, I try to discipline myself with my spending habits because I have to agree with you that there is a shocking lack of financial training for consumers. Good point.
Of course, much of this requires that the bank feel that your financial responsibility will benefit them. Which is really only true when you are on the cusp of defaulting. Up until then, you’ve just been a huge money maker for the credit department.
That said, I used to have a CIBC credit card that nicely broke down my spending into categories (much like Quicken does), and gave me a spending summary. You could set up a budget online. It was a pretty impressive service actually.
But they wanted to charge me an annual fee in order to get Aeroplan points. So they got fired in favour of BMO who doesn’t add these nice extra services, but gives me lots of air miles for free.