The other day I noticed the charge from our internet provider was about $5 a month more than it should be. I quickly used my providers online chat to raise the issue. The vendor promptly credited the difference and fixed the rate going forward. Sadly this is not a unique story. It really shows the importance of monitoring your expenses.
Monitoring Expenses and Budgeting
So much is said in the personal finance space about monitoring your expenses from a budgeting perspective. That us a real need for some, though not something I personally do on a regular basis. If you recall instead I tend to have a set total dollar amount of spending a month and just attempt to keep it relatively consistent. What I spend the money on is not a focus since I’m not actively trying to reduce the number. I do review at end of year for larger opportunities, but I do not regularly review expense category totals.
The thing is, I still keep a sharp eye on my expenses each month and so should you. I opened this post with a story of our internet provider. That’s all true. I regularly catch vendors, especially subscription based vendors, making mistakes on bills. I caught our trash bill with the same issue last month for about $60 a year. Not big money but it adds up over time.
But honestly catching incorrect billing amounts is not the only reason to monitor your expenses. Another big reason is catching fraud. With a credit card you are not liable for fraud so long as you catch and report it. Liability of a debit card is a bit less secure. Even so, if you don’t catch a discrepancy you can’t dispute the charge to not be liable in the first place.
Most card companies have fraud departments that monitor for things out of the ordinary. Still I have personally caught fraudulent transactions on cards in the past that have slipped through the cracks. Once every month I sit down with my wife and we discuss any charges that the person paying the bill can’t recognize. Of course its important to be clear with your spouse that you are doing this to catch fraud and not to micromanage your spouse’s spending. That being said that understanding out of the way i its a good conversation to have. I have more than once caught charges for internet or gaming services that have fraudulently appeared on various credit cards.
Reminder Active Subscriptions
The reason to closely monitor expenses doesn’t end there. Another reason is to ensure you remember to cancel subscriptions you no longer use. Some of them renew without any warning whether you want them too or not.
For example we once signed up for Spirits frequent flyer club for a discount on baggage for a flight. I’m sure I read they auto renew it the next year and it was non refundable, but I forgot. All I wanted was a one time discount on baggage costs for my family of 4, not a lifetime commitment to an airline I’ll now never fly again. So Spirit also failed to send me a reminder. That ended up being a contested charge that my credit card company backed me up on. If I had not monitored my expenses I never would have even caught that one, let alone found it in time to contest with my card company.
Remember to Take Action
Even when I know the charge is coming it’s still important to monitor expenses closely so you remember to take action. Take my credit card hacking. The most common concern everyone raises is the fear of incurring the annual fee because you forgot to cancel. For many cards if you don’t cancel the card before the end of the billing cycle where the annual fee occurs then you must pay the fee. The thing is, all companies are required to warn you on your billing statement that the fee is coming. Also basically all of them allow you to cancel the card for a fee refund if done so before your billing cycle ends. This essentially means I will never pay an annual fee I do not intend too as I monitor our expenses on those cards close enough to see the annual fee before the billing cycle closes.
Even when I want to incur the charge it can be important to monitor expenses closely. Sometimes when I incur a large charge the timing of the payment can have cash flow ramifications.
For example we recently installed some flooring in our basement. The charge was $2500 that would not be part of our normal monthly expenditures. Sometimes a few days can make a difference between the cost of something being due in 30 days or 60, understanding that timing can be important. Depending on timing I might pull some cash from savings, redirect extra income from my wife’s freelance business , or even do something as simple as stop a single auto investment to cover such charge. The action is defined by timing and only by monitoring my expenses do I know that timing.
Paper Billing as a Way of Monitoring Expenses
I’m going to get a gasp from the crowd here on this one. For the most part I have paperless billing turned off on my accounts. I prefer a paper copy of my bill each month to trigger me to review expenses. Someday I might decide on a better system to trigger me to go review the costs, but for today I still use the arrival of the bill for that purpose. I do pay all bills online so as to save on postage. Anyone out there have a better system for triggering expense review?