Impulsive spending might be a bigger danger to your budget than you may have noticed. At the recommendation of a friend, I downloaded the budgeting app, Cleo. Cleo is an AI chatbot that allows you to manage your money and examine spending habits.
With Cleo, you can get detailed breakdowns of your spending and figure out the category where you spend the most or go over budget. For me, the category I spent the most in was surprisingly not under “Eating out,” or “Shopping,” but under, “Transfer Out.”
I spent a large portion of my monthly budget paying people back on Venmo, which is something I had not been conscious of until I saw it put in front of me. We easily remember transactions that came directly from our card or wallet, but when it comes to asking someone to spot you, the accountability of losing that money is not acknowledged immediately.
There is a false sense of security in asking someone to spot you; this is caused by the extension of the time in which you must eventually pay for the item.
The fact is, Venmo requests pile up quicker than you expect. When you develop a habit of asking others to spot you, you create another repeating debt for yourself. Like any other bad financial habit, it will become a pattern and your biggest expense will become what you owe other people.
Committing to pay someone back is often something that will become forgotten, while it turns into a growing tab with the people in your life.
According to a study done by Finder, “Although 49% of our takers said they paid back their loans in full, there will always be a part of the population that doesn’t pay back the money you’ve lent them. In fact, 4% of takers admitted to not paying back nor having any plans to pay back the loan, which can strain a relationship.”
The aforementioned “tab,” is best reminiscent of this quote. Friends and family are mostly understanding, which creates comfort in asking for money that might not get paid back right away. However, there is always a risk that you will lose track of how much is owed to the people in your life if you don’t start tallying how many times you plan to pay someone back later.
There are plenty of things in life that will put you in debt. Being in debt to friends and family is something you should try to avoid.
According to Forbes, in an article focused on reasons not to loan money to friends and family, they reason, “You’ll be upset that they didn’t pay you back which shows that keeping promises to you just isn’t a priority for them. And they’ll feel uncomfortable every time they see you because they know they owe you money.”
The same type of advice should be addressed to those of us who are borrowers! It is a pattern and a habit, and therefore, something that can be broken with observation and consciousness.
In the process of promising others that you will pay them back, you are also making a promise to yourself about spending money you will have in the future before you get it. That is a premature commitment, which does not consider the money you will need to allocate for other necessities in the future.
The convenience of apps like Venmo has made it easier to organize debts we owe each other, but in a similar vein has also enhanced the frequency of how often we owe each other. Attempting to gain the discipline of avoiding the event of having to pay someone back is one small step towards honoring the rules of your budget and options with your money.