Overdraft fees. They can happen to anyone. Here's proof:
Not too long a long ago, I logged into my bill payment checking account to find a negative balance staring back at me. Yup, I had overdrawn my account and had been charged a $38 overdraft fee. It's not funny, but I just had to laugh at myself because "really $!&*"
So here's what happened.
"Yup, I had overdrawn my account and had been charged a $38 dollar overdraft fee."
I have a number of different bank accounts for different purposes. One of them is a bill payment account that I use to pay all my bills (including my automated bills) and day-to-day expenses like groceries and gas. I typically track this account very closely and budget it down to the last dollar. That's because I know exactly what expenses are coming through it and when those expenses are coming through.
How I overdrew my account
In this particular instance, I had gotten really busy and I wasn't as on top of tracking my budget as I typically would be. There were a couple of days where I did not log in to my bank account and I didn't reconcile my transactions against my budget. Instead, I was making mental notes of my transactions as they were happening.
If I had actually taken the five minutes to log in and reconcile things, I would have realized that I made an unplanned transaction for an expense that I could have easily adjusted for and all would have been well in the world. But I didn't—I was taking mental notes instead. Luckily, I never let more than a couple days go by without checking my account, so I caught this overdraft on the day it happened. That helped me avoid extra overdraft fees.
Getting the overdraft fees refunded
As soon as I realized what had happened, I got into recovery mode. First of all, I reconciled my budget and reviewed my upcoming transactions. I also reviewed and adjusted the reminders on my phone to alert me to check in on my budget and spending (whether I felt like it or not). Then, I called my bank and put on my sweetest voice to beg and plead for the thirty-eight dollars in overdraft fees to be refunded.
While the bank was under no obligation to give me back this money, they did issue me a refund. Why? Because overdrawing my account was not my normal behavior. I was very grateful and it definitely reminded me why I need to stay on top of things. There are a couple takeaways I'd like to review from this experience. Hopefully, these will help you avoid incurring expensive overdraft fees in the future.
Take away #1: "Set it and forget it" does not apply to budgeting
Budgeting is an ongoing work in progress. Despite the fact that I got really busy, I still needed to check in with my budget. Case in point—it only took a couple days for things to get messed up.
Of course, there's no perfect budget that gets things right every single time. Sometimes, life happens, but it's all about adjusting as you go along and creating a new budget in advance of every month. This is important since no two months are the same. Checking in and reconciling your actual spending against your budget frequently throughout the month is crucial to avoiding overdraft fees.
When it comes to your budget and building wealth, your money doesn't care how busy or how lazy you get. If you don't tell it what to do, it will do whatever it pleases. You don't want that because that can get really expensive.
Take away #2: Mental calculations don't work
Those mental notes I was making were a waste of my time, and I knew better. All I needed to do in order to avoid those overdraft fees was take the five minutes to check in with my accounts and my budget and get it right. As opposed to running mental calculations, just take the 5 or 10 minutes you need to review your finances and adjust things as needed—it's worth it!
Put some re-occurring time on your calendar once a week to sit down and really go over your budget and your transactions in detail. Also, spend a couple minutes once a day just checking in on your most-used bank account. Finally, getting overdraft protection on your account is not a bad idea either. All of these combined, are a sure-fire way to avoid overdraft fees!
So there you have it, another money mistake but another lesson learned!