For those of you who have been around here for a while (thank you, I wrote very infrequently then), you probably remember my post the high cost of being a moron. For those of you that don’t to make a long (and rather ill thought out) story short, I bought a car for a good price, had it all lined up to sell it for more than I bought it, and then it got towed, which basically ate up all my profits (and then some). However, that was basically the last time that I really messed up my finances. I’ve been doing a good job avoiding fees, making payments on time, and spending less than I earn since then.
Like all good things though, it didn’t last. In 2010, I decided one of my goals for the year was to not get anymore overdraft fees. Well, I was able to make it through a whole year without them, and to be honest, I didn’t miss them at all. I was glad that I was able to keep my money, and because I was spending less than I earn, I got to keep even more of it. This led to me paying down a lot of debt. Pleased with my progress, I figured that overdraft fees were a thing of the past and moved on with my life.
Unfortunately, it did not last. When I was in school, my dad often had interesting sayings that contained advice, and one of my favorites was “Don’t crap in your own mess kit“. What this meant was that I basically needed to get out of my own way and stop making things hard for myself. It’s good advice and I found that it works well when I follow it. One would say that with my paychecks, I don’t. Here’s how my system works: I have paychecks from both jobs deposited into my savings account at bank 1. It’s the only account I have at that bank, and it links to my checking account. After I get paid, transfer some money (but not all) into my checking account. From there I pay bills, and it usually works out well. At the end of the month, I move more money into my checking account and make a debt payment. Using this method, I’ve been able to build up some savings as well as pay off a lot of debt. It’s worked well.
Last week, I made my usual transfer as I had my car, car insurance and student loan payments coming up. After I signed off, I didn’t think anything of it, and just waited for the auto-bill pay to pull the money from my account. Two days later (after my payments were supposed to be drawn) I went to check my account balance. I had -350 or so in my account! I was obviously stunned, and when I looked at my savings account, the reason was staring me in the face. Apparently in my haste, I transferred the money from my checking to my savings, instead of the other way around. There was not enough in my checking to cover the transfer, so the bank turned it down.
Once that happened, I was basically just going to hang there until I could get a new transfer set up and have it finish. Between those two times I had 2 bills pulling. The car payment came first, and because of my history (according to the girl at the counter) they decided to pay that and charge me $30 for it. Then they did the same for my insurance. The student loans had not drawn by the time I got my account back into the positive, so the damage stayed at around $60 bucks.
After being annoyed at the overdraft fees, I started to look at it another way – what if they had not paid it and I was going to be charged a higher rate over the life of the loan (5 more years)? I think the rate would have gone up enough (it’s currently .9%) to make the $30 seem like small potatoes in the long term.
Obviously, I’m trying to look on the bright side here, but I’d rather just have my $30 back and have not made a mistake. Have you ever made a dumb financial mistake like this? What did you do, and how did you rectify the situation? Unfortunately for me, there really was nothing that I could do, so I just had to wait it out.
I make moronic mistakes ALWAYS! I don’t think your mistake today was high cost at all. We live and let learn.
The new batch of Yakezie Member Posts are starting to go up. Stop by and say hello!
Cheers, Sam
Sam – Glad to see more new members – and yes, we do live and learn.
Yep. Chalk it up to an education expense.
I pay off my Amex bill in full each month. Some time ago, I had forgotten to pay it on time and was charged a fee. A phone call quickly got the fee reversed. But then a couple months later, the same thing happened. I was too embarrassed to call, so I just paid the fee. It’s now marked in my electronic calendar twice to make sure I get it paid each month.
For your situation, I would recommend keeping an extra $500 or $1,000 in your checking account to cover this situation. That’s what I do and it’s well worth whatever pittance of interest you’re missing out on. Don’t lose the dollars while counting the pennies!!!
Great advice robert. The thing is, I do this all the time mistake free, and I guess I just wasnt paying enough attention enough to catch my mistake this time. I think putting a buffer in my account is a good idea.
You should sign up for overdraft protection! Its essentially a credit line that covers any overdrafts, and you’re charged interest instead of a daily assessed fee. Much better deal. Obviously, the main goal is don’t let it happen, but secondly, don’t let it happen expensively. 😛
I haven’t made too many financial mistakes, I don’t think, but there’s still plenty of time to screw up. My tight-wad grasp on my money usually keeps me from anything that bad.
Err, I think I’ve paid a credit card late before…$29. I called and they removed it, only for me to forget to pay it again the next month. After that, I was sure to set up a new system for managing my accounts and I haven’t had any problems since.
Getting a good system in is probably the most important part of all this. If it’s something that can be easily automated, then i’ll probably need to look into it more and get something set up.
Hey Jeff, what bank do you use? Something similar happened to me once and I was OD’d. But the bank charge was $5!
I use bank of the west, and I wish their fee was that low.
I’m sure you have your reasons for being with them, but you should seriously consider switching to a CU or a bank with lower fees.
But yeah, I wouldn’t opt out of OD protection. The consequences would’ve been more expensive.
yea, having an interest rate increase on my largest debt balance would have been killer.
MoneyCone, I think it may depend on both your bank and how good of a customer you are… My just charges me a service charge of $5 when I go into overdraft which I don’t actually have. In my case they have every right to charge overdraft fees but manager allowing the overage chooses not to because of the other accounts I have with them. (I asked about it, this is what she told me) It’s not something I rely on but it’s saved me the $35 overdraft a few times now… lol
And @ Jeff, yup I’ve done this… transferred money from one of my accounts to the other at 10Pm when a bill comes out at 12AM… wrong account… realize it the next day when the balance is -$120 and I think what the???? Ohhh duh! Stupid stupid stupid! Someday we’ll stop doing these moronic things… I hope.
Yea, for me it’s become much less frequent – so rare in fact, that I was almost unsure of what to do in the situation. I just had to wait it out, but this is the first time in at least a year that this has happened. Hopefully it will be the last for a while
Andrea, quite possible. I’ve been with them for a while…
I’ve made similar mistakes from time to time in the past before I had a much more workable system.
As for changing banks and/or signing up for overdraft protection, before you do that get a fee schedule from the bank that shows all the fees you might incur on your account. Banks are adding fees for everything these days. Some have implemented overdraft protection transfer fees which are quite in addition to any interest you might pay on the credit line.
Many banks allow you to use savings accounts at the same bank as overdraft protection for your checking account. Maybe the simplest solution would be to open a checking account at the same bank where you have your savings and link them in that way.
Your system seems fine in general, but putting your checking and savings in the same bank gives you two added layers of protecting yourself from yourself. First is the OD protection connected to the savings. The second is most bank websites will tell you if you’re trying to do a transfer from an account that doesn’t have sufficient funds to cover the transfer.
Chris –
Great points. I think I may look into this. The reason that I currently dont have my checking and savings at the same bank is because it was easy to transfer money – too easy, so I spent all the money I had intended to save. Keeping a small overdraft savings could be a great buffer
Yeah, I did something dumb once, when it came to finances. It was almost 20 years ago, I may have been a college sophomore, maybe a junior? Anyway, I got myself on the hook for an apartment lease and for dues in my fraternity house. Don’t ask how, but it was dumb. Fortunately, I was able to get out of it in a couple of months, but it was crazy. This might have the makings of a blog post, if I’m looking to embarass myself (why the heck not).
personal embarrassments usually make for the best blog posts.
I got the amount right – just not the account. Much more diligence will be required in the future.
We all make mistakes financial or otherwise! Learn from the mistake. I try to make things as automatic as possible because I may forget to check my list. Using the Internet to its advantage I went paperless, but I get a reminder to pay a bill. If it is the same each month like a mortgage, I set up a payment.
We all make mistakes. I made the mistake of paying a loan payment with my chase freedom card last month, and got charged a ‘cash advance’ fee. It’s a load of crap!
It happens… typically, a bank will refund you one overdraft fee per year (at least BoA did last couple times I did this.) But you have to go in and talk to them. In a case like this, I would maybe just be happy that they paid the bills instead of just not putting them through :).
Also I know that BoA had free overdraft protection where you could link to your savings account. (I don’t use BoA anymore.)