Is Your Debit Card The Secret Weapon To Sticking To Your Budget?

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Staying on top of your budget is a crucial part of making sure that you’re financially secure. However, if you find it hard to practice self-discipline when it comes to spending, there’s good news: you don’t have to rely on sheer willpower alone.

Instead, you can make use of the right tools to help you stick to your budget. In fact, you probably have one such tool in your wallet right now. That’s right, your debit card is more than just a piece of plastic you can use to withdraw money. Debit cards can be powerful tools to help you stay on top of your finances. Here’s how.

1. They are compatible with popular budgeting methods

Budgeting methods usually work by making you save upfront, then helping you allocate the rest of your income. This makes debit cards really useful, as you can allocate a certain amount of money to each card. For example, here’s how to make them work with two popular budgeting methods.

a) 50/30/20 budget

The 50/30/20 budget suggests that you allocate 50% of your income to needs (e.g. necessary expenses like housing), 30% to wants (fun expenses like dining out) and 20% to savings. To make this budget work with debit cards, set up monthly transfers that automatically move your money into these accounts right after you get paid:

• Current account A: 50% of your income for needs
• Current account B: 30% of your income for wants
• Savings account: 20% of your income

You just need two debit cards – one assigned to current account A (your needs) and one to current account B (your wants). This makes it easy to stick to your budget, as you’ll know exactly how much you have left to spend at all times, and you can’t spend more than what you have allocated.

b) Envelope budget

The envelope system is similar to the 50/30/20 budget, except that it drills down to specific spending categories. With this system, you’ll have to allocate funds to each category, such as groceries, entertainment, transportation and so on. Once you’ve exhausted the contents of an envelope, you can’t add any more money into it.

Of course, it’s not practical to have a single debit card for each spending category – imagine trying to keep track of a dozen cards!

But you can take a hybrid approach. For example, you don’t need a card for some spending categories, such as your rent or bills, which can be automatically transferred from your bank account every month. Instead, you can use debit cards for variable expense categories, such as dining out or entertainment. This helps you limit your spending, as you’ll only have a certain amount to spend in these categories.

2. You can automatically track transactions

If you’ve ever reached the end of the month and wondered where all your money has gone, it could be time to start tracking your expenses. It’s easier to keep spending under control when you know where your money is going. For instance, tracking your expenses could reveal that you’ve been spending more in particular on food or shopping than you thought.

Some people track their transactions with a mobile app, with a spreadsheet, or with plain pen and paper. But tracking transactions manually is kind of a hassle. Who wants to whip out a notepad to record a coffee purchase when you’re out with friends?

Here’s where a debit card is handy, as all your transactions will automatically be recorded. At the end of every month, you can access an online statement with detailed information about each transaction. This makes it easy to see exactly how much you’re spending, without recording them manually.

3. You can’t spend more than what you have

A big part of budgeting is simply not spending more than you earn.

This makes debit cards useful, as you can’t spend more than what you have in the account that’s linked to the card. If you struggle with impulse purchases, you can force yourself to spend within budget by depositing a limited amount of money into your account. Even though this doesn’t sound like much fun, you won’t have to worry about getting into debt or spending more than you can afford.

4. You don’t have to bring physical cash

Some people like withdrawing a certain amount of cash every week or month as a sort of ‘allowance’. If you use the envelope budgeting method, it could mean withdrawing cash for several spending categories at once.

But here’s the problem. Imagine that it’s the start of the month, and you’ve just filled up your cash envelopes for day-to-day spending. Perhaps that’s RM500 in your groceries envelope, RM300 in your dining out envelope and RM300 in your transportation envelope. That’s a lot of cash to be carrying around! If it gets stolen or misplaced, you could lose a big chunk of money.

On the other hand, debit cards serve the same function as envelopes of physical cash – without the inconvenience. Besides that, if you ever do need access to cash, your debit card doubles up as an ATM card, so you can easily withdraw what you need. Otherwise, just use your card to make contactless payments.

Stay on top of your budget with debit cards

In short, debit cards can be a great money management tool, particularly if you struggle with self-discipline when it comes to spending within budget. They’re also especially relevant right now, as making a payment under RM250 is as easy as a tap – this minimises physical contact and helps you stay in line with safety and hygiene measures during the pandemic.

Contactless payments using debit cards has seen triple-digit growth in recent years as more Malaysians adopt this payment mode in their daily life. Learning to track their spending using debit cards and knowing where their money is going will also help Malaysians be aware of the importance of managing their finances better.

So the next time you’re out, whip out your debit card instead of cash – it’s safer, more convenient and better for your budget.