Managing Your Debt in a Cashless SocietyDec 19, 2016
How often do you use cash when making a purchase? With the increasing popularity of tap-enabled credit and debit cards, mobile payment apps and wearables, many Canadians are choosing to go cash-free. Sixty-five per cent of Canadians admit that they rarely use cash at all and this number is expected to increase in the near future. As transactions get quicker, easier and more convenient, it’s important to consider what effect digital technology will have on your spending habits. Moreover, with the average amount of pre-mortgage, consumer debt in Ontario sitting at $21,520, it’s also important to consider the effect this new form of payment could have on your debt management strategy.
There are some indications that digital pay might make debt management a more difficult task. Why? Tapping your credit card or flashing your smartphone isn’t as tangible as paying with cash. Even swiping your credit card and entering your pin is more of a tangible process. With the newest forms of digital payments it almost seems like you’re not spending money at all, especially if you’re making multiple small purchases on your phone or using an RFID bracelet. Lots of small digital purchases can also be harder to track, which can certainly make sticking to a budget more complicated.
Debt management is possible in a cashless society. Here are some financial tips that will help you to go cash-free and still manage your money and your debt:
Keep track of your purchases
In order to stay on top of your finances and avoid adding to your debt, it’s important to keep track of what you buy when choosing to use a digital payment option. Look for a money management or budgeting app like Wally or Mint to make this an easier task. A good financial app should include tools to help keep track of your spending (in real time) and monitor your budget. There are free financial apps that will link to your bank accounts and credit cards, allow you to set up alerts, organize your receipts and consolidate all of your loyalty cards.
Before you tap…
You have your smartphone or credit card at the ready — all it takes is a simple tap to finalize your purchase. Now is a good idea to really think about the money that you are about to spend. Pause and question whether your purchase is a necessity or simply an impulse buy. Does it fit in your budget? Then, consider whether you should use cash instead of credit. There are times when this is a good idea. Using cash for small purchases, like your morning coffee, makes you immediately aware of the amount you are spending — especially if you make a habit of keeping cash on hand for this kind of spending. Groceries are another instance where cash might be a good idea, as this is often an area where people tend to overspend. Finally, 53 per cent of Canadians said they were worried about their online information when using mobile payment apps. If you’re concerned about cyber security, it might be a good idea to put away the plastic and opt for cash instead.
Keeping track of your purchases, making smart purchasing decisions and using cash when appropriate are great ways to manage debt in the digital age. If you want to expand your knowledge about debt and explore other ways to get debt help, online resources such as the Financial Consumer Agency of Canada (FCAC) website, provide all kinds of information about debt management strategies and tips.
Do you use digital payment options like tap-enabled credit cards when purchasing goods and services? Does it make managing your debt more difficult? Join the conversation and share your thoughts with BDO Woodstock using the hashtag #BDODebtRelief.