The rise of frictionless payment technology may be making it easier for consumers to lose track of their spending, contributing to what the author calls “budget amnesia,” The Washington Post reports.
One single mother with $80,000 in student debt reviewed a year of bank statements and discovered that her finances weren’t being undermined by major purchases, but by dozens of small, easily forgotten “ghost charges.” One-click checkout, tap-to-pay, mobile payment apps, saved card information and increasingly biometric payments reduce the psychological discomfort traditionally associated with spending, making it easier to buy without pausing to consider the cost.
The result can be money that otherwise could go toward debt repayment, savings or retirement. To combat this issue, consumers can conduct a detailed financial audit using six to 12 months of printed bank and credit card statements rather than relying on budgeting apps or spending dashboards. Consumers should also examine every transaction, including ATM withdrawals and obscure vendor charges, and categorize purchases by type while identifying convenience spending. They should then calculate their “amnesia tax,” the total spent on purchases they cannot remember, and question whether each purchase was a need or want, why they made it and whether it conflicts with their long-term financial goals.
For the single mother, the exercise revealed hundreds of dollars that could have gone toward her debt.
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